IMF supports Miley’s “bold measures” with disbursement of US$4.7 billion

first Amendment: 02/01/2024 – 02:53Last change: 02/01/2024 – 05:04

3 minutes

“The new administration is taking bold steps to restore macroeconomic stability” to “avoid a balance of payments crisis,” IMF Director Kristalina Georgieva said in a statement released after a meeting of the organization’s Executive Board.

But “the road to stabilization will be difficult,” he warned, a day after the IMF predicted Argentina would face a recession this year with GDP shrinking by 2.8%.

“Difficult Inheritance”

Georgieva attributed the situation to a “difficult legacy”, including “high and rising inflation, declining reserves and high levels of poverty”, which worsened in the last months of Peronist President Alberto Fernández’s tenure.

In contrast, she seems pleased with the “ambitious agreed stabilization plan”, which involves ending all central bank financing of the government and achieving a primary fiscal surplus of about 2% of GDP this year, i.e. interest payments on the debt. before.

This surplus “will be supported by a combination of temporary taxes,” along with “efforts to rationalize subsidies for energy and transportation, administrative costs.”

Since taking office less than two months ago, Miley has devalued the peso by 50%, initiated a price liberalization process and introduced hundreds of regulations and rules to address a crisis that keeps more than 45% of Argentines in poverty. Intends to amend the laws. With an annual inflation of 211% in 2023.

Georgieva estimates that after the readjustment of the exchange rate, policy should “continue to guarantee the objectives of reserve accumulation”.

“Strengthening the central bank’s balance sheet remains a priority,” he added.

social support

It also stresses the importance of correcting price imbalances, reforming the energy sector and “building a simple, rules-based and market-oriented economy”.

To achieve this, Georgieva estimates that the government will have to combine “agile policy making and contingency planning” and does not rule out the need for additional measures.

But remember that “clear communication and well-targeted social support is essential,” as well as receiving social and political support.

Convincing citizens is proving difficult for Miley and it won’t be easy in Congress, which is debating his controversial 386-article omnibus law on economic, political, security and environmental reforms.

The Board’s approval of the seventh review of the credit agreement with Argentina with an immediate disbursement of $4.7 billion, as part of a $44 billion assistance program, increases the amount transferred to the South American country to approximately $40.6 billion.

The country is facing a crisis of foreign exchange shortage, huge debt and practically no access to international credit markets.

© 2024 AFP