MercoPress. South Atlantic News Agency

Argentine minister meets IMF Lagarde and US Treasury official: ratifies “gradualism”

Nicolas Dujovne is due to meet with IMF chief Christine Lagarde to request a financing package

Argentina Economy Minister Nicolas Dujovne is due to meet on Thursday with IMF chief Christine Lagarde to request a financing package to help shore up the struggling economy, officials said. Dujovne will also meet with a senior US Treasury official in a key step in the talks with the IMF, which are likely to last six weeks, his spokesman said in a statement.

 The talks come 17 years after the country defaulted on its debt and 12 years after it cut ties with the IMF, amid a bout of market turbulence rocking Latin America's third-largest economy.

Argentine President Mauricio Macri announced on Tuesday that he was going to the IMF for help as a “preventative” measure after the nation's currency plummeted amid high inflation and rising US interest rates. Officials have declined to say how big a line of credit Argentina is seeking.

“Argentina will ask for a 'stand by' financing arrangement with exceptional access,” the spokesman said, referring to a level above the normal loan amount the IMF provides.

IMF stand-by loans last for up to three years, but more usually 12-24 months. They require regular reviews by fund staff to make sure the government is following through on reform commitments and meeting targets for things like spending cuts.

Dujovne met on Wednesday with senior IMF officials to begin the discussions, and a fund spokesman confirmed the talks will continue on Thursday.

Investors in recent weeks have been fleeing Argentina, driving up demand for US dollars, and driving the peso down.

The central bank has burned through US$ 8 billion in reserves in a week to support the currency, leaving them with about US$ 55 billion. It also raised the benchmark interest rate to 40%.

But going to the IMF is a risky move for Macri, given the bitter history the country has with the Washington-based lender, and the negative views on the conditions the fund might require.

In January 2006, Argentina paid down its last loan to the IMF and severed relations with the fund, refusing even to allow the regular annual review of economic conditions conducted for all member countries for the next 10 years.

The loans at the time were needed after the country suffered an economic crisis in 2001 that sparked the downfall of four presidents and default on US$ 100 billion in foreign debt.

But Macri's chief of staff, Marcos Pena, told reporters on Wednesday the government remains committed to “gradualism” in its economic reforms, to fix the errors of the previous administration.

After taking office in December 2015, Macri floated the Argentine peso, ending the strict controls in place under the government of Cristina Kirchner, and began to address outsized government spending.

In addition to the weak peso, Argentines are struggling with double-digit inflation, which hit 24.8% last year. The government has set an inflation target of 15%, which it insists will not change, but the IMF is forecasting a rate of 19% this year.