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IMF report on Argentina calls for further expenditure control

Monday, August 28th 2023 - 11:29 UTC
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Argentina's mining exports in 2023 might grow up to fivefold, the IMF forecast Argentina's mining exports in 2023 might grow up to fivefold, the IMF forecast

The latest International Monetary Fund (IMF) report on Argentina highlighted that the targets for reserve accumulation, fiscal deficit, and monetary financing of the deficit were missed “by wide margins.” As a result, imbalances have increased, so “further expenditure control will be needed throughout the election period.” The 1.9% GDP fiscal deficit target remained unchanged.

 The document also stated that “the crawl rate will be calibrated to support the accumulation of reserves” despite Economy Minister and presidential candidate Sergio Massa's announcement that the official currency exchange rate would stay stable until November. Meanwhile, the monetary policy interest rate will remain at positive levels.

In this scenario, new adjustments to utility rates and public spending (with a focus on a 5% deduction of government salaries) were proposed for the remainder of the year.

This IMF technical staff's suggestion stemmed from the fact that “around 60% of public sector workers received real salary increases of more than 10% during the first half of 2023,” according to the report. These increases were reflected “in the rapid real growth of the government wage bill by 7% year-on-year in the first half of the year,” it added.

The IMF estimates that inflation in August will stand at “around 10%” but foresaw that it would “decline to less than 5% per month by the end of 2023” for a projected annual total of 120%.

After talks between IMF authorities and Argentine government officials as well as with experts from the opposition parties La Libertad Avanza and Juntos por el Cambio, the report stated that both the current administration and those who might reach Casa Rosada on Dec. 10 “have expressed their commitment to the general terms of this strategy.” The document also mentions a 30% drop in the volume of imports and warns about the debt with importers.

Regarding the Central Bank (BCRA) reserves, around US$ 6 billion could be amassed during the second half of 2023, the IMF argued in addition to suggesting limited interventions in the foreign exchange market.

The report also noted that the banking sector remained resilient, although highly exposed to the public sector. The IMF also projected growths in exports, particularly in energy and mining of up to fivefold.

Top Comments

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  • Pugol-H

    ‘targets for reserve accumulation, fiscal deficit, and monetary financing of the deficit were missed “by wide margins.” As a result, imbalances have increased, so “further expenditure control will be needed’

    Hummm, so it’s still getting worse and so is the cure.

    5% pay cut for people who had a 10% pay increase at a time of 120% inflation???

    Are there no rich people to tax and seize assets from?

    I wonder what the annual budget is for the Argentinian Ministry for Colonisation of the S. Atlantic/Antarctic?

    Aug 28th, 2023 - 01:51 pm +2
  • imoyaro

    Graft and pilfering cost money. It's just part of the cost of government...

    Aug 28th, 2023 - 06:12 pm 0
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