MercoPress. South Atlantic News Agency

Argentina passes IMF test with flying colors, will get US$ 800mn

The IMF thanked Caputo and Bausili for their strong commitment to restoring economic stability

After passing the eighth review of its debt refinancing program with the International Monetary Fund (IMF), Argentina is expected to receive a US$ 800 billion disbursement in the coming weeks, it was announced Monday. However, the transaction still needs to be approved by the IMF Board of Directors.

Under President Javier Milei and Economy Minister Luis Toto Caputo, the South American country was way within the fiscal deficit target agreed upon with the IMF, and therefore the Board's nod seems to be a mere formality, according to Buenos Aires media. The roadmap provided for a fiscal deficit of 3 % of the Gross Domestic Product (GDP) in 2021, 2.5 % in 2022, 1.9 % in 2023 and 0.9 % in 2024. Argentina achieved its first surplus since 2008 in the first quarter of this year, albeit at the expense of thousands of layoffs coupled with a deterioration in the purchasing power of wages.

An “understanding was reached on policies to further anchor the disinflation process, rebuild international reserves, support the recovery, and keep the program firmly on track,” the IMF said in a statement. Argentina's results were “better than expected,” the IMF also noted.

Nevertheless, the credit agency pointed out that “continued efforts are needed to improve the quality and fairness of fiscal consolidation, fine-tune monetary and exchange rate policy frameworks, and address bottlenecks to growth.”

The IMF also reckoned that “despite inheriting a highly complex economic and social situation, the authorities' firm implementation of the stabilization plan has allowed faster-than-expected progress in restoring macroeconomic stability and putting the program firmly back on track.”

Monday's announcement came in the aftermath of May 9's general strike called for by the General Labor Confederation (CGT) to protest against Milei's adjustment (“chainsaw”) policies.

“Upon completion of the review, Argentina would have access to disbursements commensurate with the program,” the IMF also stressed in its statement.

“Among the most notable results were the first quarterly fiscal surplus in 16 years, a rapid fall in inflation, a turnaround in international reserves, and a sharp reduction in sovereign risk,” the document went on.

“The authorities have made significant efforts to expand social assistance to vulnerable mothers and children, as well as to protect the purchasing power of pensions. Progress continues to be made in broadening political and social support for these efforts and in combating entrenched interests,” the Washington-based agency also pointed out.

The IMF also thanked Minister Caputo and Central Bank President Santiago Bausili “for their continued constructive engagement, as well as their strong commitment to restoring economic stability and laying the foundations for a stronger and more sustainable economy, which will boost employment and private investment for the benefit of all Argentines.”