Argentina hopes to obtain another loan from the International Monetary Fund (IMF). The Minister of Economy, Luis Caputo, announced this Tuesday that the Latin American country will negotiate a new agreement with the IMF with the aim of accelerating the elimination of exchange restrictions and thus favoring the economic recovery of the South American country, mired today in a harsh recession: According to World Bank forecasts, Argentina’s GDP will contract by 3.5% in 2024. The IMF avoided commenting on the possibility of a new agreement and limited itself to confirming that they will maintain dialogue with local authorities “on the best option.” way to support the progress of Argentina.”
According to the IMF, its relationship with the Government of Javier Milei continues to focus on the current agreement, signed in 2022 to renegotiate the debt of 45,000 million dollars that the country contracted four years before. This agreement contemplates periodic disbursements from the IMF so that Argentina can honor its financial commitments in exchange for meeting fiscal and monetary goals. Unlike the adverse results of 2023, which Peronist President Alberto Fernández attributed to a record drought, Milei has exceeded all goals in the first quarter of 2024: Argentina has had a fiscal surplus in that period, has stopped monetary issuance and has accumulated international reserves of 17,000 million dollars. For this reason, the disbursement of the 800 million dollars linked to the eighth quarterly review is taken for granted: this has already been approved by the technical staff and the only thing missing is the signature of the steering committee, which meets this Wednesday.
“It will probably take some time and we are not announcing it now because it has to be agreed with the Fund first. We are going to try to get new money with this new program,” Caputo anticipated at an event organized by the liberal think tanks Fundación Libertad y Progreso and the CATO Institute in Buenos Aires. According to the head of the economic portfolio, the Government plans to begin negotiations on the new program on Thursday, one day after the steering committee authorizes the disbursement of the 800 million dollars.
Six months without a law
The IMF has applauded Milei’s economic policy at the start of his mandate, but warns that it has to strengthen the course with solid laws, a pending issue until now for the Government. The ruling party La Libertad Avanza (LLA) has been fighting for six months in Congress to approve the Bases law, with which Milei seeks legislative powers for one year and the green light to privatize public companies, close state agencies, deregulate the economy and give enormous benefits to large companies that invest in energy and mining.
The legislative minority of LLA – 38 deputies out of 257 and seven senators out of 72 – has forced the Government to divide the law in two and make concessions that are highly resisted by Milei, who has branded “extortioners”, “criminals” and “rats” opposition politicians. This Wednesday, a draft of the initiative with modifications to the one received from the Chamber of Deputies will be voted on in the Senate. If approved, it would return to the Lower House for the final vote.
In parallel, the Government is looking for dollars to fulfill one of Milei’s electoral promises, the elimination of the exchange rate. The last restrictions on the purchase and sale of foreign currency were imposed at the end of the conservative Mauricio Macri’s mandate and tightened by Fernández. According to Caputo, the four conditions necessary to eliminate the stocks are “fiscal balance, having solved the problem of the stock of demand for dollars inherited from the previous management, dollar flows and a reasonable relationship between BCRA reserves and remunerated liabilities.”
The Government has managed to balance public accounts at the cost of a severe tourniquet of spending on pensions, public works and salaries of state employees. Reserves have increased, but still insufficiently. The Government aspires to have at least 15,000 million of positive net reserves in the Central Bank before taking this step that would leave the country exposed to an exchange rate run. Milei and Caputo have knocked on the doors of international organizations and businessmen, but so far they have had few answers.
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