The IMF gives support to Milei and disburses 4.7 billion for Argentina

This Wednesday, Javier Milei received his first disbursement from the International Monetary Fund, some 4.7 billion dollars that the organization had committed to the new Government on January 10 and of which Argentina will use almost half to meet debt maturities with the same Background.

This afternoon, the IMF executive board approved the quarterly goals of the debt payment plan that Argentina took in 2018, during the government of conservative Mauricio Macri, and that was renegotiated in 2022 with the Peronist Alberto Fernández.

This is the seventh review of this payment plan and the first under the Milei Government, which requested to continue the agreement earlier this month.

The IMF disbursement “is not new money”, as the Minister of Economy, Luis Caputo, explained on January 10, but part of the payment plan that Peronism negotiated in 2022 to pay to modify the payment terms of the debt of 44,000 million dollars that Macri had taken four years before.

It is, however, a boost from the organization to the Milei Government.

The last two revisions of the payment plan occurred together in August of last year, weeks before the presidential primaries, while Milei gained strength in the polls, and Peronism, led by the then Minister of Economy and presidential candidate, Sergio Massa, sought close the disbursements to remove the IMF from the electoral campaign.

He achieved it halfway: the IMF board of directors then authorized another disbursement of 7.5 billion dollars, but did so as an exception.

Argentina, the IMF said in a statement, had not met its reserve accumulation and fiscal deficit reduction targets due to an “unprecedented drought and policy deviations,” but approved the new economic aid package to “safeguard the stability and strengthen sustainability in the medium term.”

Milei won a second round on November 19 and the seventh review of the agreement, scheduled for the end of last year, was left up in the air until this month.

On the 10th, Minister Caputo announced that the review had come to fruition.

The IMF welcomed the “strong initial actions” of the new Government to “significantly improve public finances in a way that protects the most vulnerable in society and strengthen the exchange rate regime.”

The Government, in the voice of Caputo, stated that the agreement brought closer positions for "If one wanted to go to a new agreement and eventually request new funds", and the Fund warned that it would depend on a "continuous and lasting implementation" of the fiscal adjustment that The new Argentine Government began in December with a 50% devaluation of the peso and increases in energy and public transportation rates, among others.

Since this Wednesday, the Argentine Congress is debating the megalaw with which the new Government intended to deregulate the economy with the sale of public companies, a change in the formula that adjusts pensions to inflation, and raising taxes on federal imports.

The last two measures have been erased from the plan while the Government seeks consensus among deputies, but Milei still hopes that Congress will grant him emergency legislative powers to impose her plan.

The debate, which the deputies have faced point by point of a law that contains almost 400 reforms, has continued throughout Wednesday and will probably last until the weekend.

Milei has promised the IMF that he will turn the 2023 fiscal deficit, almost 3% of GDP, into a 2% surplus for this year, and that he will accumulate reserves of almost $10 billion.

How he will do so while his state scrapping law flounders in Congress is a still open question.

In its forecast report for this year, presented on Tuesday, the IMF predicts that Argentina will suffer a 2.8% drop in GDP and that annual inflation would reach around 150%.

It is, nevertheless, optimistic: last year Argentine inflation was 211%, the highest in the world, accumulating a 25% increase in prices in December alone.

According to local media reports citing official sources, Argentina will use some 2,800 million of the 4,700 million it has received to pay debt maturities with the Fund itself, between the installment that was due this Wednesday and interest scheduled for February 1st.

The rest of the disbursement will be used to pay off more debt in the month of April.

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EL PAÍS América