IMF to postpone Argentina review to give Milei more time

The International Monetary Fund (IMF) will permit Argentina to postpone this year’s last review of the agreement covering the U$S44-billion IMF loan, scheduled for September, according to information shared with Reuters news agency.

If confirmed, it would allow the Javier Milei administration more time to apply economic reforms and potentially negotiate a new programme.

According to Reuters, the decision was to be confirmed on Wednesday by the IMF board of directors, which was also due to approve the 7th review, concluded on January 10 when a committee travelled to Argentina to meet Cabinet members, as well as the remittance of U$S4.7 billion agreed on that occasion.

This calendar extension aims at “guaranteeing that the programme meets its objectives,” assures the international news agency, such as the target of a primary surplus of two percent of Gross Domestic Product this year, as agreed with the IMF and divulged by Economy Minister Luis Caputo, who headed the latest negotiations, together with Cabinet Chief Nicolás Posse.

The programme with the IMF expires in September so that postponing the review in that month opens the door to negotiating a new agreement. In that sense former IMF director Claudio Loser maintained: "The targets are important but they do not bind the country as such” while adding: “If significant austerity is agreed for the first half of the year, there will be no major problems on the part of the IMF board for approving the programme.”

The 2023 financial deficit was 6.1 percent of GDP, one percent above the Economy minister’s estimate and breaking down into a primary deficit of 2.9 percent with the remaining 3.2 percent coming from interest payments to service the debt.

To make the correction in 2024, which with these data is superior to the numbers agreed when the La Libertad Avanza government came to power, its economic programme could be even stricter and that is precisely what is expected by the IMF as they follow with attention the Congress debate over the omnibus bill ("Ley de Bases y Puntos de Partida para La Libertad de los Argentinos") while measuring the government’s capacity of reaction following the elimination of the economic chapter of that bill.

Yet everything would seem to point to Board support for the libertarian administration. Héctor Torres, a former member of that board of directors, maintained that the government setback with the fiscal chapter of the “Bases” bill sent to Congress “will doubtless weigh in the analysis and will be an issue to be considered in the Board of Directors” although explaining in dialogue with PERFIL: “I do not believe that it will hinder approval. If the IMF were to condition the continuity of the programme on the legislative approval of the fiscal package, they would be handing over a weapon to extort the government. I believe that they will avoid that.”

Yet the downfall of the fiscal chapter in the libertarian bill did not mean giving up on austerity. In that same improvised Friday night press conference on January 26, Caputo admitted that he would use other instruments for the necessary cuts to achieve zero deficit. To that end his Ministry is studying an acceleration of public service subsidy cuts and an advance in the sale of assets.

The 2024 calendar of payments to the IMF

According to the Congress Budget Office (OPC in its Spanish acronym), on the basis of Economy Ministry data, the payments currently falling due this year are estimated at U$S33.09 billion.

Much of this sum corresponds to commitments to the IMF in the framework of paying off the loan contracted by the Mauricio Macri administration 2018, equivalent to a total of U$S7.463 billion to be paid in seven months as follows: