Argentina, IMF agree US$50bn stand-by financing deal

DEJA VU::Thousands have been protesting against Argentine President Mauricio Macri turning to the IMF, fearing a repeat of the economic malaise of the beginning of the century


Sat, Jun 09, 2018 - Page 10

Argentina and the IMF on Thursday agreed on a three-year US$50 billion stand-by financing deal aimed at strengthening the country’s economy and helping it fight inflation.

The IMF said the staff-level agreement would be subject to approval by the international body’s executive board, which would consider Argentina’s economic plan in the coming days.

In Argentina, where many have criticized the government for turning to the IMF, Argentine Minister of the Treasury Nicolas Dujovne said that the funds would be available after the executive board meets on June 20.

“The package includes an immediate withdrawal of 30 percent, or US$15 billion, and then we will see,” he said at a news conference.

Terms of the arrangement include the goals of reducing the Argentine government’s budget deficit by 2020 and of bringing down inflation to 17 percent by next year, 13 percent by 2020 and 9 percent by 2021, Dujovne said.

Argentina’s consumer prices have been rising an estimated 25 percent a year, one of the world’s highest inflation rates.

“I am pleased that we can contribute to this effort by providing our financial support, which will bolster market confidence, allowing the [Argentine] authorities time to address a range of long-standing vulnerabilities,” IMF managing director Christine Lagarde said.

Argentine President Mauricio Macri last month announced that his government was seeking a financing deal with the IMF following a sharp devaluation of the Argentine peso and a tough global economic outlook.

That decision rekindled bad memories for many Argentines who blame IMF austerity policies then for the country’s worst economic crisis in 2001, when one out of every five Argentines were jobless and millions were thrown into poverty.

Thousands have joined in protests against Macri’s move to get IMF financing, as well as his government’s belt-tightening measures, including the elimination of subsidies for utility rates.

Critics of the deal asked how the government will meet deficit-reduction goals without making cuts to social assistance, subsidies and employment.

“The goals of the agreement with the IMF will mean thousands of layoffs, a lower budget for health and education, belt-tightening for the retired and labor reform. In short, a series of measures against the people,” Argentine Socialist Workers’ Party leader Nicolas del Cano said.

IMF officials said that Argentine authorities have pledged to maintain a floor under social assistance spending during the three-year duration of the program.

Macri said the deal is needed to avoid another economic implosion.

The financing arrangement “is a very important starting point,” he told reporters several hours before the deal was announced.

Macri, a conservative who took office in 2015, has said that the IMF money would allow Argentina to avoid another economic implosion and has promised that the deal would not harm the estimated one-third of Argentines who are poor.

The IMF has forecast that economic growth in Argentina will slow from last year’s 2.9 percent to 2 percent this year due to a drought that hurt agricultural production and the government’s efforts to rein in inflation.