The International Monetary Fund (IMF) expects Argentina’s government debt to peak by the end of 2018 and then fall as the country cuts its deficit as part of its US$50 billion deal with the Fund, according to a document published.
Debt is forecast to peak at 65% of GDP before falling to 56% by 2021, the last year of its program, IMF staff wrote in a document prepared before the Fund’s board approved the deal. The report had not previously been released.
A run on the peso currency earlier this year amid a worldwide investor retreat from emerging markets and concerns about the Argentine government’s ability to fight inflation prompted Argentina to request a stand-by arrangement from the IMF in May.
The IMF report also lays out policies it said the government could take to reduce the deficit. Some of those were not included in Argentina’s letter of intent last month, where it outlined the steps it would take to reduce the deficit.
The IMF policies that were not in the letter include keeping soy product export taxes at an average of 25.5%, and delaying implementation of parts of last year’s tax overhaul.
In a statement released with the report, IMF mission chief for Argentina Roberto Cardarelli said the country’s economy would shrink in the second and third quarters. The report forecasts growth of 1.5% in 2019 and “around 3%” in 2020.