IMF expects the Argentine economy to “start growing” in the second half

He IMF insists that the adjustment plan Argentina is giving “better than expected results” and expects the economy to “start growing” in the second half of the year, a spokeswoman for the financial organization said Thursday.

The International Monetary Fund is pleased with the progress made since the ultraliberal president Javier Milei He took office in December with one goal: to drastically cut spending, what he called the “chainsaw” plan.

“The strong involvement and determined application by the authorities of their stabilization plan are yielding better results than expected,” said Julie Kozack, director of communications for the Fund, at a press conference in Washington.

He cited the first quarterly fiscal surplus in 16 years, the “rapid recovery” of international reserves and an improvement in the central bank’s balance sheet, as well as a rapid reduction in the inflationwhich went from 25% in December to around 8.8% in April.

Kozack thus reiterated the conclusions of the IMF technical team that reached an agreement this week with Argentina on the eighth review of the aid package that will allow the disbursement of almost US$800 million as soon as it obtains the green light from the board.

This is the first “all criteria met” review of the credit program. Argentina with the Fund, under which the South American country receives US$44 billion over 30 months in exchange for increasing its international reserves and reducing the fiscal deficit.

“Working families”

“These are all important steps in the right direction and we hope that the economy will begin to grow again in the second half of this year” but “the road ahead remains difficult,” the spokesperson stressed.

He IMF estimates that the government must tackle the crisis from three fronts: fiscal, monetary and the application of reforms to generate formal employment and attract private investment.

At the fiscal level, it must improve the effectiveness of the tax system but also “continue to ensure that social assistance is sufficient and well targeted to protect the most vulnerable” and ensure that the burden of adjustment “does not fall disproportionately on working families.”

Monetary policy “will need to continue to evolve to anchor inflation” and exchange rate “should become more flexible over time,” Kozack declared.

The spokesperson did not mention the exchange rate that Milei wants to lift, that is, the exchange control in force since 2019 that limits access to dollars in a country in which the US currency acts as a safe haven for savings.

But he stated that “policy changes will be necessary as exchange controls are gradually relaxed” and authorities “transition” to a new regime whereby “the peso and other currencies such as the US dollar can coexist and be freely usable”. This is what happens in Peru and Uruguay, he said.

Nor did he mention that the IMF is going to lend to Argentina more money than agreed in the credit program.

“Current discussions with authorities focus on this ongoing review,” the spokeswoman said.