In return, the country committed to transforming the primary deficit into a surplus and increasing net foreign exchange reserves
The agreement between Argentina and the IMF (International Monetary Fund), achieved on Wednesday (10.jan.2024), will allow the unlocking of US$4.7 billion. In return, the country's government committed to transforming the deficit primary in surplus and increase net reserves. The text will be presented in the coming weeks to the IMF Executive Board to receive the body's approval.
“Understandings were reached on a strengthened set of policies to restore macroeconomic stability and put the current program back on track, as its main objectives were not met by large margins due to serious political setbacks by the previous government [de Alberto Fernández]”, said the IMF in a joint note with the Argentine government (completeEnglish – PDF – 395 kB).
The Argentine government said that the amount that will be unlocked “is intended to support strong political efforts” from the new management to “restore macroeconomic stability and help Argentina meet its balance of payments needs”.
Argentina committed to obtaining a surplus 2% of GDP (Gross Domestic Product). To achieve this objective, the administration of Argentine president, Javier Milei, stated that it will “to combine” measures aimed at improving the relationship between income and expenses.
“Revenues are expected to be supported, temporarily, by higher trade-related taxes, as well as gains from the normalization of agricultural production”, the note reads.
“The rationalization of expenditure will be supported by reductions in administrative costs, energy and transport subsidies, discretionary transfers to provinces and public companies and expenditure on lower priority infrastructure”, he adds.
Argentina said it intends to accumulate US$10 billion in net reserves in 2024, including the US$2.7 billion accumulated in December 2023.
The government stated that it had “opaque system of administrative import controls abandoned” and it is “in the process of solving the problem of the large debt of importers”, offering “foreign exchange instruments” that enable registration “adequate” of commercial debts.
The new regime is, according to the Argentine government “more market-based”, abandoning “the previous approach of intervening in parallel futures currency markets”.
The note reads: “The monetary policy stance will evolve to support money demand and disinflation, while the monetary policy framework and operations will be adjusted to reinforce its anchoring role. Authorities have committed to ending Central Bank credit to the government and will continue to reduce the large surplus burden”.
Argentina stated that “consistent with the fiscal program”, will not search “any form of liquid financing in the market”. Milei’s management will “concentrate” in improving domestic debt. “Rebuilding relationships with international capital markets is also a top priority”, the government stated.
Regarding structural policies, Argentina declared that it was “determined to address long-standing impediments to growth and exports”. Furthermore, “boost the vast energy and mining potential” from the country.
The agreement was made by the Argentine Economy Minister, Luís Caputo, and the Civil House Minister, Nicolás Posse. The representatives met with IMF emissaries at the Casa Rosada offices, headquarters of the Argentine government. Argentina's debt to the IMF is part of a loan of US$44 billion made in 2018 by former president Mauricio Macri.
In 2022, to alleviate the economic situation, then president Alberto Fernández made a new agreement with the institution that allowed the rollover of the debt contracted by the country at the time. The contract also determines that the country will only start paying the debt in 2026.
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