The International Monetary Fund’s executive board has approved a US$4.7-billion disbursement to the government of Argentine President Javier Milei, according to a person with direct knowledge of the matter.
The payments are part of a refinanced US$44-billion programme, the lender’s largest, that was beset by uncertainty for months during the election campaign that saw Milei oust the Peronist government of Alberto Fernández. The board’s decision Wednesday follows a staff-level agreement reached in Buenos Aires earlier this month.
An official IMF statement is expected later Wednesday afternoon, according to the person, who asked not to be identified before the press release goes public.
Milei recently stripped the most important austerity measures — including key tax hikes — from a sweeping reform package in order to appease lawmakers. Economy Minister Luis Caputo nonetheless insists Argentina will still meet its goal of “deficit zero,” and a primary surplus this year equivalent to two percent of gross domestic product is one of the targets set by the IMF.
The IMF also wants Argentina to boost net foreign reserves to US$10 billion by year-end. The Washington-based lender expects that Milei’s monetary policy stance will evolve in coming months as an initial currency devaluation of 54 percent ripples through the economy. The disbursement is more than the US$3.3 billion initially expected and buys the new president time to honour debt repayments to the Fund before deciding whether to continue with the current programme brokered by his predecessor or negotiate a new one.
Milei’s Cabinet Chief Nicolás Posse travelled to Washington this week and met with the IMF’s number two, Gita Gopinath, Tuesday afternoon. Milei met Gopinath and IMF Managing Director Kristalina Georgieva at the World Economic Forum in Davos, Switzerland earlier this month.
“What this administration is doing is to very aggressively address some of the shortcomings we all see,” Georgieva said during a Bloomberg event at Davos. “Fiscal: out of whack — you spend more than you can afford. Reserves: wiped out. So we are seeing progress on all those fronts.”
The IMF sharply cut its growth estimate for Argentina on Tuesday, forecasting South America’s second-largest economy will shrink for two consecutive years as Milei pushes for a “significant policy adjustment.” The fund expects GDP will contract 2.8 percent this year as inflation soars.
by Manuela Tobias, Bloomberg
Comments