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IMF provides $4.7 billion in aid to Milley’s Argentina

Javier Milley’s government and the International Monetary Fund have announced a new agreement that will see Argentina continue to repay its $44 billion debt with the multilateral organization. An International Monetary Fund mission concluded its first visit to the far-right Mire government on Wednesday after nearly a week of meetings and reached a technical agreement with the government to award it a new $4.7 billion allocation. Approval must be decided by its board of directors and will depend on the “sustained and durable implementation” of fiscal adjustments announced by Argentina’s new government in mid-December. The money is not a new loan but corresponds to disbursements from the IMF’s program to Argentina between December and the first quarter of 2024. The country will use the payment to repay its own debt to the organization.

The International Monetary Fund celebrated in a statement that “the new government is already implementing an ambitious stabilization program based on a large-scale initial fiscal consolidation, actions to rebuild reserves, correcting relative price imbalances, strengthening central bank balance sheet and build a system” that is simpler, rules-based, and market-oriented. “This is not a new agreement,” Miles Economy Minister Luis Caputo said at a press conference in Buenos Aires on Wednesday evening. Caputo clarified: “The previous agreement was It was put on hold after achieving its goal and has now been resumed. He did not close the door to asking multilateral organizations for more financing. “If you want to reach a new agreement and eventually ask for new funds, the IMF is open to that possibility,” the minister said.

The Argentine government has been warning for days that the repayment plan signed by the Peronists with the International Monetary Fund in January 2022 to repay the $44 billion in debt assumed by conservative Mauricio Macri’s government in 2018 has failed to The plan “almost fell through” if it could fulfill its promise. Achieve fiscal adjustment and reserve accumulation targets. Although officially this is not the case. Milley boasted during the campaign that his cuts were “even tougher” than those required by the International Monetary Fund, and he was very confident he would not run into problems with the organization.

The fund accompanied him: when Argentina’s new government announced its first interest rate hike, the elimination of energy and transport subsidies, and a 50% currency devaluation, the organization celebrated “strong initial actions” aimed at “significantly improving the fiscal situation.” Protect the most vulnerable in society and strengthen the exchange rate regime. ” On Wednesday, before the announcement of the new technical agreement, the International Monetary Fund issued a statement warning that “the new government has inherited an extremely challenging economic and social situation with growing macroeconomic imbalances, which mainly reflect inconsistencies and expansionary policies, especially in the last few quarters of last quarter. “Year”.

January 28 this year marks the second anniversary of the agreement between the Peronist government of Alberto Fernández and the International Monetary Fund on a new payment plan for the original 2018 loan. The plan was revised six times between January 2022 and July 2023, the last time the Peronist government met. The path to joining international organizations has been a circuitous one. With a historic deficit in its currency reserves, Argentina ended up paying off maturing debt with other loans and yuan provided by China for future benefits, and the refinancing deal sparked a war between Fernandez and the government majority led by the vice president. Cristina Kirchner and Peronism bid farewell to the International Monetary Fund on the eve of the presidential primaries on 13 August.

The IMF later admitted that Argentina had failed to meet its goals of reducing public spending and building reserves due to a drought-driven decline in agricultural exports and the government’s “political deviations,” but agreed to pay $7.5 billion to cover Argentina’s debt. its debt, and the last meeting with the government ended with a payment schedule until the end of 2022 and a promise to convene a new meeting in November to review targets. Peronist Economy Minister Sergio Massa managed to escape the IMF when he ran as a candidate in the presidential race. But he lost out to Milley and a review agreed late last year remained pending until this week.

A delegation from the IMF arrived in Argentina on Friday to kick off the Milley era, and meetings with new Argentine officials were completely confidential. IMF representatives met with technical teams from various ministries last Friday and on Monday with Economy Minister Luis Caputo and Chief of Staff Nicolas Posé. According to the government, the agenda is not predetermined and the finance minister has ruled out requesting new funding.

The IMF expects Argentina to end the year with net reserves and a fiscal surplus of $10 billion. During the announcement of the government, Minister Caputo targeted the issues that have been at the center of Argentine politics these past few weeks: his national reform bill (which begins discussion in Congress on Tuesday), as well as the necessity and urgency of the 300 reform decrees among which the listing Privatization of corporations, labor market flexibility, and deregulation of health insurance. “The president is taking the right path and has tremendous courage to take steps Shock Given the urgency and necessity of change. Obviously, society comes with this. The question is whether politicians will step up,” Caputo said of the lawmakers who must vote on the measures in Congress. “If the law is not passed, the measures will be even more draconian,” he warned. “

Through Milei, Argentina’s relationship with the IMF began a new phase, one that was more orthodox and pro-market. Milley’s rapprochement with the IMF strengthens the far-right’s alliance with the United States. For Milei, the stance also means distancing itself from countries it considers “communist”, such as Brazil and China, its two main trading partners. The far right has just officially renounced membership in the BRICS, the economic alliance of Brazil, Russia, India, China and South Africa, which Argentina joined in August. The decision reduces the financing options available to the Argentine government, which has pledged to make its economic adjustment program effective enough to rely entirely on the fund.

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