Monday, June 24, 2024

ECONOMY | 14-08-2023 21:59

IMF sets date for Argentina disbursements, backs devaluation

International Monetary Fund backs Argentina's devaluation of peso and raising of benchmark interest rates; Spokesperson confirmes August 23 meeting to approve release of funds.

The International Monetary Fund (IMF) on Monday praised economic measures taken by Argentina in the wake of the previous day’s tumultuous primaries.

After outsider libertarian deputy Javier Milei emerged as the candidate with the most votes, President Alberto Fernández’s government anticipated market turbulence by devaluing the peso by more than 18 percent. The Central Bank then moved to raise benchmark interest rates.

In a statement, the IMF said that it “welcomed the authorities’ recent policy actions and commitment” to improving “fiscal order.” It also announced an August 23 meeting to approve new loan disbursements outlined in Argentina’s US$44-billion debt programme.

Under the terms of the country’s multi-billion-dollar deal, the Central Bank must increase its international currency reserves and the government must reduce the fiscal deficit from three percent of gross domestic product in 2021 to 2.5 percent in 2022, 1.9 percent in 2023 and 0.9 percent in 2024. 

“On July 28, the Argentine authorities and IMF staff reached staff-level agreement on the combined fifth and sixth reviews under Argentina’s 30-month Extended Fund Facility (EFF) arrangement,” said the IMF statement signed by Director of Communications Julie Kozack. “This agreement is subject to the approval by the IMF Executive Board, which is expected to meet on August 23 to unlock the agreed disbursements.”

In July, Economy Minister Sergio Massa, who is also running for the country's presidency for the ruling Peronist coalition, said the disbursements would be made in two tranches: one in the third week of August and the other in the first week of November.

One of the IMF's priorities is for Argentina to meet the goals of the agreement, something it is struggling amid 40 percent poverty and with a large part of the population dependent on state aid.

For the multilateral lender, the latest measures taken by the government of Alberto Fernández are a step in the right direction and will help to “safeguard stability, rebuild reserves and enhance fiscal order.”

Argentina's economic measures took place a day after primary elections in which Milei shook up the electoral race, taking 30 percent of the national vote. 

The leading parties opposed to Fernández's Peronist government have called for a devaluation of the peso and, combined with Milei who wants to dollarise the economy, banked almost 60 percent of all ballots cast in the presidential primary.

The Central Bank on Monday raised rates to 118 percent. Argentina suffers from one of the highest inflation rates in the world, currently running at an annualised 115 percent. 



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