President Mauricio Macri unveiled plans on Monday to raise export taxes on grains and slash the number of government ministries in a bid to balance its budget next year, as Argentina seeks a deal with the IMF to accelerate a US$ 50 billion standby loan program.
Argentina’s economy is expected to contract 1% in 2018, but grow by at least 1.5% next year, Minister Nicolas Dujovne told reporters on Monday. Dujovne said the government was maintaining its fiscal deficit target of 2.7% of GDP for full-year 2018. The government also expects a current account deficit of 3% of GDP in 2019, he said.
Argentina’s economy contracted 6.7% in June compared with the same month last year, and 1.3% compared with May, government statistics agency Indec said on Thursday. June was the third consecutive month of decline following 5.2% in May and 0.6% in April.
Argentina posted a primary fiscal deficit of 105.8 billion pesos (US$3.7 billion), or 0.8% of gross domestic product (GDP) in the first half of 2018, government data showed on Thursday, down 26.7% from the same period last year.
Consumer prices rose 3.7% in June in Argentina, official data showed on Tuesday. That brought 12-month inflation to 29.5%, up from 26.3% in the 12 months through May, the INDEC national statistics bureau announced, which makes it the highest monthly recorded figure of the last two years.
The Executive Board of the International Monetary Fund (IMF) approved on Wednesday a three-year Stand-By Arrangement (SBA) for Argentina amounting to US$50 billion (equivalent to SDR 35.379 billion, or about 1,110 percent of Argentina’s quota in the IMF).
Argentina is looking to expand an existing currency swap arrangement with China, as Buenos Aires looks to stabilize the economy one month after applying for financial aid from the International Monetary Fund. In an interview with the Financial Times, Argentina’s Chief of Cabinet Marcos Peña, said “we have an active swap with China that the previous government left us and we will try to make it bigger.”
In a continuation of a previous arrangement, the International Monetary Fund (IMF) has approved Colombia for a flexible credit line of US$ 11.4 billion. The new two-year arrangement replaces the pre-existing credit line, which has now been cancelled. Colombia will continue to see the funds as precautionary to be used only in if economic conditions worsen due to an external shock or other emergency, according to the IMF.
Following twelve hours of heated and at time acrimonious debate the Argentine Senate on early Thursday voted, 37 to 30, to freeze utility prices. President Mauricio Macri had anticipated that if the bill was passed he would veto it because there is no way the budget can stand an additional 1% of GDP deficit.
The late MIT economist Rüdiger Dornbusch used to tell his students in the 1980s that there are four kinds of countries: rich, poor, Japan, and Argentina. No one frets anymore about Japan buying its way to world domination. But the world is worrying again about Argentina.