MercoPress. South Atlantic News Agency

FT critical of IMF leniency towards perennial defaulter Argentina

The newspaper also foresaw yearly inflation “could reach 90%”

A column published by the Financial Times has stressed that the administration of President Alberto Fernández needed “stricter targets” from the International Monetary Fund (IMF) to keep a “weak and populist” government from running astray.

The newspaper said the agreement signed in March with the IMF “is already in trouble” and warned that the international agency should have insisted on stricter targets to inspire business confidence and investment amid Peronist populism and failed economic policies.

“Tough love, rather than bandages, is what Argentina needs,” the Financial Times stressed. The publication also underlined that Argentina should be booming because of its gas, oil, and lithium reserves, its vibrant technology sector, and its grain exports, and yet it was staggering towards one of its periodic collapses.

The newspaper also foresaw yearly inflation “could reach 90%” and pointed out Argentines were rushing to get rid of local pesos.

The FT also warned that the country's sovereign debt, restructured less than two years ago, was once again trading at distressed levels as “investors take cover,” while the country struggles to finance itself after being isolated from international markets as a result of its 2020 default.

The British newspaper also noted that the Argentine Government was issuing copious amounts of domestic debt at ever-higher interest rates, mostly linked to inflation, and encouraging the Central Bank (BCRA) to print more and more pesos “to fill the gap.”

“Tight exchange controls, grain export restrictions, energy subsidies, and state-imposed price freezes complete a gloomy picture,” the publication pointed out. But “if the economy is bad, politics is arguably worse,” it went on.

The Financial Times blamed the rift between President Alberto Fernández and the mighty Vice President Cristina Fernández de Kirchner for the departure of former Economy Minister Martín Guzmán, who had planned “successful debt restructurings with private creditors and the IMF.”

 

According to the FT, CFK and her allies hated Guzmán for refusing to spend more. His departure robbed the government of its only credible official, the publication pointed out.

 

The newspaper also argued that the odds were against newly-appointed Economy Minister Silvina Batakis delivering on her promise to meet IMF targets, both from the political and financial angles.

 

The article says the IMF was too lenient when presenting itself as a helpful partner to the perennial defaulter and insisted the “perennial villain” of Argentine politics had agreed to a bailout that is already in trouble.

 

In this perfect-storm scenario, history is about to repeat itself, warned the FT. Because, except for the IMF and Batakis, nobody seems to believe that the country can still meet the annual targets.

 

To make matters worse, the FT piece goes on, the US dollar trades on the unofficial market at twice as much as on the government's exchange boards and financial ruin is already lurking, the FT stressed, while noting that

 

Citibank economists considered it “very likely” that the Government will manage to either control emission, increase its reserves or cut the spending deficit.