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ECONOMY | 04-07-2022 15:08

Analysts say Argentina's IMF deal at risk with new economy minister

Analysts say Argentina's US$44-billion programme with the International Monetary Fund may be in jeopardy after President Alberto Fernández chose leftist economist Silvina Batakis as the country's new economy minister.

Analysts say Argentina's US$44-billion programme with the International Monetary Fund may be in jeopardy after President Alberto Fernández chose leftist economist Silvina Batakis as the country's new economy minister.

Her appointment, following the sudden resignation of Martín Guzmán on Saturday, is seen by economists as a victory for the left-wing of the country's ruling coalition, aligned with Vice-President Cristina Fernández de Kirchner.

This is what analysts say about Batakis:

Diego Pereira and Lucila Barbeito of JPMorgan.
– "Batakis' appointment seems to indicate that the balance of power has shifted to the Kirchnerite side and we would expect a more expansionary fiscal stance and, potentially, a renegotiation of the IMF programme amid growing imbalances and a wider exchange rate gap."
– "The way forward looks shaky as we approach an election year, making any orthodox tightening politically costly and therefore unfeasible"

Nicholas Watson of Teneo
– "As an immediate priority, Batakis will need to refinance short-term peso-denominated debt equivalent to around 2.7 percent of GDP by September."

Marcos Buscaglia of Alberdi Partners
– Guzmán's departure was partly due to "his inability to get energy secretaries and undersecretaries to implement parts of the tariff increases announced about a month ago."
– "We see Batakis as a lightweight compared to the economic challenges facing Argentina. We believe he will tighten foreign exchange controls and, at the same time, is likely to rein in public spending."
– Batakis "has repeatedly expressed her favourable view on export taxes, so we do not rule out that she will push for legislation to increase export taxes."

Javier Timerman of Adcap Securities
– "There is a government going through a difficult situation, and the fact that it cannot even organise a press conference to communicate the change of ministers has an impact on people's behaviour and on the markets."
– "So, the president and vice-president have to sit down with the economy minister and talk about what level of inflation they are willing to tolerate, how much they want to lower spending or cool the economy."

William Jackson of Capital Economics
– "This is likely to lead to a looser fiscal stance accompanied by higher inflation and tighter capital controls. The country's agreement with the IMF already appears to be wearing thin."
– The IMF programme "appears to be going off the rails even earlier than we had anticipated. A sovereign [another] default is starting to look increasingly likely."
 

by Scott Squires, Bloomberg

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