A few days after Javier Milei took office as president, the International Monetary Fund warned Thursday that Argentina needs "a strong and credible stabilization plan" that is "politically supported" to address the long-term difficulties facing the country. And he said "a strong and credible central bank" is required to bring inflation down.
At a press conference in Washington, IMF Communications Director Julie Kozack received several questions about Argentina, but avoided giving details about the future of the program, which has been derailed and must be renegotiated urgently in the face of important maturities that will reach Milei in the first days of his government.
She described a "challenging and very complex" economic outlook. He said that "inflation is very high, reserve buffers are extremely low and that happens in a context of very fragile social conditions."
He added: "Against this backdrop, a strong, credible and politically supported stabilization plan is needed to address Argentina's macroeconomic imbalances and structural challenges in a lasting way, while protecting the most vulnerable."
He said that Managing Director Kristalina Georgieva had a "very constructive" virtual meeting with Milei in recent days that discussed the challenges facing Argentina and the need for "meaningful political actions." He also noted that the president-elect "underscored his commitment to strengthening public finances, reducing inflation, and creating a more prosperous economy led by the private sector." And that the IMF pledged to support it in those goals.
He also referred to the meeting held in Washington last week between future Economy Minister Luis Caputo and future Chief of Staff Nicolas Posse, with the Fund's number two, Gita Gopinath, and the IMF's staff.
"There was talk of the new government's new authorities to restore macroeconomic stability, as well as plans to carry out reforms to strengthen medium-term growth prospects in the country. On a technical level, these positive conversations have continued and we hope that our actions in the country will continue."
Asked about the possibility of Argentina being a candidate to access a loan from the Resilience and Sustainability Fund, as Managing Director Kristalina Georgieva had slipped, she said that they are "rather hypothetical questions or questions that would require speculation and I am not going to speculate, I simply want to say that we are working with the authorities" on a plan.
In addition, he was asked about the appointment of Santiago Bausili, a friend of Caputo, to the Central Bank, the doubts about its autonomy and whether the body should be a pillar for the stability program, Kozack said that "at this time we are focused on having a strong, credible stabilization plan, with support to see the country's challenges. Of course, inflation is one of the imbalances and that requires a strong and credible central bank to be able to reduce inflation."
With the deal virtually collapsed and reserves in the red, the new government needs to renegotiate with the IMF urgently. The November review was left in limbo by the transition. So Caputo will have to seek an agreement for the maturities that are coming (only in the first 40 days of government they will face debt of US$ 4,450 million, most of them with the IMF) to reach the relief of the coarse harvest in March.
The minister should get an advance of funds from the IMF or elsewhere, or delay payments in an "amicable" manner. He has already presented in Washington Milei's adjustment plan, which involves reducing the deficit much more than the agency demands.