IMF approves the disbursement of some US$ 800 million to Argentina

The executive board of International Monetary Fund (IMF) gave joy to the Argentine president this Thursday, Javier Mileiby approving the immediate disbursement of some US$ 800 million, but warned that it must “improve the quality of fiscal adjustment.”

One month was the time it took to approve the eighth revision of the credit agreement, which obtained the approval of the technical staff in mid-May.

The new disbursement supports ““the efforts of the authorities to strengthen the disinflation process, rebuild fiscal and external reserves and shore up the recovery”says the Fund in a statement.

In 2022, the IMF and the Argentine government agreed to a credit program 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, 3% of the Gross Domestic Product in 2021 a 2.5% in 2022, 1.9% in 2023 and 0.9% in 2024.

With the eighth review approved, Argentina will have received a total of about US$41.4 billion.

The credit program continues “firmly on track, with all quantitative performance criteria having been met by a margin by the end of March 2024,” adds the financial institution in a brief statement.

But “To maintain solid progress, it is necessary to improve the quality of fiscal adjustment, initiate steps towards an improved monetary and exchange policy framework, and implement the structural agenda,” he warned.

And he insisted that the government of ultraliberal President Javier Milei make an effort to “support the most vulnerable, expand political support and ensure agility in policy formulation.”

Additionally, the board approved “default exemptions for a new exchange restriction and multiple exchange practices in the context of some easing of restrictions on dividend payments.”

“Good news”

Milei wants to lift as soon as possible the so-called exchange rate trap, that is, an exchange control in force since 2019, which limits access to dollars in a country with historically high inflation in which the US currency acts as a safe haven for savings.

But for that he estimates that he needs about US$15,000 million (apart from those agreed in the credit program). Obtaining these funds has become the goal of Argentine Economy Minister Luis Caputo’s team, but the IMF has until now considered it hasty and seems reluctant to let the country go into further debt.

The objective is complicated by the proximity of the presidential elections in the United States, the main shareholder of the financial organization.

Exchange stocks aside, in recent hours Milei is on a good streak. “The good news continues”wrote the Argentine president on his X account when sharing the IMF statement.

This Thursday the National Institute of Statistics published May inflation, which moderated to stand at 4.2%although in 12 months it is still one of the highest in the world, touching the 280%.

Furthermore, the Senate approved its State reform package at dawn in a marathon session marked by riots in front of Congress that left around twenty people injured and detained.

But the so-called Basis law for deregulation of the economy must return to the Chamber of Deputies for final approval.

On Thursday the Argentine Senate also adopted a fiscal package that introduces an asset regularization regime (money laundering) and a controversial incentive for large investments that offers tax, customs and exchange advantages for 30 years to foreign capital exceeding 200 million Dollars.

All this added to the renewal of the swap with China confirmed yesterday. Since Milei took office last December with his “chainsaw” plan to drastically cut spending, the IMF has praised the progress made by the Argentine government.

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