The International Monetary Fund said Friday that latest talks with Argentina on a new programme included discussion of an “appropriate” monetary policy with interest rates that are higher than inflation.
After a week of meetings in Washington with Argentine officials, the IMF made its most detailed outline yet for the type of inflation strategy Argentina needs to implement as part of a programme to reschedule payments on more than US$40 billion in debt.
“Tackling persistent high inflation requires a multi-pronged approach involving a reduction of monetary financing of the fiscal deficit, appropriate monetary policy with real positive rates and wage-price coordination,” according to a statement issued by the IMF’s Western Hemisphere Deputy Director Julie Kozack and mission chief to Argentina Luis Cubeddu.
Argentina’s benchmark interest rate is currently 38 percent, while the rate of inflation is 52 percent.
Negotiations between Argentina and the IMF have picked up momentum in recent weeks after nearly two years without concrete progress. IMF officials noted that there are “general understandings” between both sides, including on improving public finances while also allowing for “targeted social spending.”
More discussions will be needed with Argentine officials as both sides work toward a new programme, the IMF said.
President Alberto Fernández announced after midterm elections on Nov. 14 that his government would send a multi-year economic plan to congress that would serve as the basis for an IMF deal. His spokeswoman said Thursday the plan will go to Congress before the end of the year.
by Patrick Gillespie, Bloomberg