IMF warns of risk for Argentina if lasting fiscal consolidation is not applied

He International Monetary Fund (IMF) warned this Tuesday of the risks for Argentina If your president, Javier Mileifails to implement its economic plans and the country does not apply “lasting fiscal consolidation.”

This is what the IMF chief economist, Pierre-Olivier Gourinchas, estimated in a press conference: “The biggest risk going forward is whether this fiscal consolidation can be implemented and applied in a lasting manner so that the situation in Argentina stabilizes from a set of very deteriorated initial conditions”he claimed.

In its latest economic outlook report (WEO) published this Tuesday, the IMF reduced the growth forecast for the Latin American country by 5.6 points.

Thus, while previous estimates made in October expected growth in Argentina of 2.8%, in just three months there has been a decrease of 2.8%.

Regarding 2025, the IMF estimates that the country will grow 5%, 1.7 points more than estimated in October.

“This is a very considerable downward adjustment” and also of “a fairly strong rebound in growth” in 2025, which “It is conditional on achieving the fiscal consolidation that is beginning to take place in the country under the new administration”Gourinchas stated.

With the aim of speeding up its parliamentary process in Congress, the Milei Government decided last week to withdraw the fiscal chapter from its bill. ‘omnibus law’which will be discussed these days in the chamber.

In recent weeks, the Fund has raised the tone of criticism against the Government of former President Alberto Fernández (2019-2023) for failing to meet the key objectives of the extended facilities program signed with the entity in March 2022 to refinance the debt contracted in 2018. during the mandate of Mauricio Macri (2015-2019) for about US$ 45,000 million.

On January 10, Argentina and the Fund announced an agreement by which the multilateral organization will disburse $4.7 billion for the South American country to face upcoming debt maturities and which will serve – according to the IMF – to support “strong political efforts” of the Government of Milei, who assumed the presidency in December.

“The current administration is trying to achieve a very considerable fiscal consolidation, it is trying to reach a primary surplus of 2% of GDP in 2024 (…) and this is something that we consider absolutely necessary in the context of Argentina”Gourinchas explained this Tuesday.

In his opinion, part of the efforts of the current administration are “reduce a series of relative price distortions that existed during the previous administration” and which have resulted in a strong depreciation of the currency and a inflation what, today “It is at 211%.”

These bank estimates have been published while the chief of staff of the far-right Government, Nicolás Posse, is visiting Washington.

According to his preliminary agenda, Posse – the Argentine president’s most trusted person – will hold a working meeting with the deputy managing director of the IMF, Gita Gopinath.