IMF Managing Director Kristalina Georgieva has warned that there is “no alternative” to Argentina's pending agreement with the Washington-based crisis lender, warning that the country’s struggle with inflation and poverty will be extended without a deal.
"Our main focus is to get Argentina out of this very dangerous path of high inflation," she told reporters on Thursday.
"We know that inflation is a tax on the poor," said Georgieva, commenting on Argentina’s runaway price increases which total over 50 percent annually. The IMF chief also insisted that the gap between the black market and official exchange rates are “in the wrong place.” and at the moment it is close to 50 per cent, the IMF chief said, insisting that the black market exchange rate against the official rate "is in the wrong place."
Last week, President Alberto Fernández announced that Argentina and the IMF had reached a preliminary deal to renegotiate US$44.5 billion in debt in exchange for economic reforms, though further negotiations are still to come.
Georgieva said these talks offered a path forward for Argentina, and without a deal, poverty would rise, particularly among children.
"Let's concentrate on reaching an agreement and then sticking to it," said the Bulgarian economist. "What is the alternative? The alternative is nothing.”
Without it, she continued, the situation would only continue to deteriorate, "continuously increasing poverty, including child poverty."
"Our team is very focused on getting the very best for the country," she added.
The basic principles behind the initial agreement – which the IMF has described as “an understanding” – has seen Argentina commit to a progressive reduction of its fiscal deficit, vow to lower inflation and revise its exchange rate and monetary policy, including the financing of the Treasury, among other points. It will be reviewed quarterly by the Fund.
Georgieva said that it is a "pragmatic programme" and that it could be adjusted during its timespan.
"In other words, if we can do more, we will do more, which will help Argentina address the most important structural problems,” she said, highlighting those as “taxes and public spending.”
"We want to see more revenue [come in] in a way that is sustainable over time" and "we want high quality spending, more transparency," said the IMF chief, stressing that an assessment of public investment management is being worked on with the World Bank and that those recommendations would be taken into consideration.
The new agreement will replace the stand-by agreement taken out in 2018 by former president Mauricio Macri. That was worth an initial US$50 billion and extended to US$57 billion, of which Argentina has received US$44 billion. President Alberto Fernández refused to accept the remaining tranche of the loan upon taking office in December 2019.
The main difference between the current agreement and its replacement is the payment terms. While the deal signed four years ago loaded the heaviest repayments between 2022 and 2024, the new accord will see them spread out between 2026 and 2032.
Argentina is committed to reducing its fiscal deficit by 0.9 percent of gross domestic product in 2024 under the new deal, with targets of a 1.9 percent trim in 2023 and 2.5 percent cut by 2022, according to the government. It also foresees US$5-billion growth in international reserves at the Central Bank in 2022, which currently stand at just over US$38 billion.
Once an agreement is finalised, it must be ratified by Argentina’s Congress and approved by the IMF's executive board.
Georgieva declined to speculate on what would happen if lawmakers rejected the deal.