The International Monetary Fund (IMF) is risking its reputation with a new agreement with Argentina that does not address the changes the country needs to overcome its "cycle of low growth and instability," a former top official at the multilateral lender said Monday.
Alejandro Werner, who headed the IMF's Western Hemisphere Department from January 2013 to August 2021, called the preliminary agreement between the Fund and the Peronist government of Alberto Fernández to refinance Argentina's multibillion-dollar debt "disappointing."
"The macroeconomic policy targets of the programme are very weak, there is negligible strengthening of macroeconomic institutions, and a structural reform agenda is completely absent," the economist wrote in a column for Americas Quarterly.
IMF staff and Fernández's government announced a pre-agreement on January 28 to renegotiate the country's US$44.5-billion debt, a legacy of the record US$57-billion loan granted in 2018 to the administration of former president Mauricio Macri.
Werner questioned Fernández for "blaming" previous governments for high indebtedness instead of undertaking policies to resolve "very deep" structural issues, in particular public spending running at more than 40 percent of GDP.
The new agreement, which would be the IMF's 23rd with Argentina, "settles for the minimum conditions to avoid descending into the abyss," but "will not contribute to putting the country on course to exit decades of instability and stagnation," wrote Werner, the incoming director of Georgetown University's Institute of the Americas.
He warned that "the probability of the programme going off-track is high, and it will generate moral hazard as other countries will demand similar treatment in their engagements with the multilateral" lender.
"It seems that, in the end, the IMF decided not to become the odious collector that punishes Argentina for not being able to repay their debt, nor the ogre that imposes tough medicine," he said.
"By agreeing to this very weak EFF under the logic of the achieving the 'possible programme' and not the 'right programme' the IMF is putting its reputation on the line behind the authorities’ economic agenda while it waits for the 24th programme with Argentina," concluded Werner, a Mexican economist born in Buenos Aires in 1967.