Argentina “made progress” in talks on Tuesday with the IMF aimed at securing an accelerated disbursement of a US$50 billion loan it hopes will calm its debilitating economic crisis.
IMF managing director Christine Lagarde said she and Argentine Minister of Finance Nicolas Dujovne held “discussions about how the fund can best support Argentina in the face of renewed financial volatility and a challenging economic environment.”
Lagarde said talks would continue yesterday, aiming to reach “a rapid conclusion to present a proposal to the IMF executive board.”
Photo: AFP
Dujovne said it was too early to “give figures when we’re in the middle of discussions with authorities.”
Earlier, US President Donald Trump expressed “strong support” for Argentina after a telephone call with Argentine President Mauricio Macri, who has announced plans to slash the country’s bureaucracy and raise taxes on exports to calm battered financial and currency markets, and get the economy back on an even keel.
“I have confidence in President Macri’s leadership, and I strongly encourage and support his engagement with the International Monetary Fund to strengthen Argentina’s monetary and fiscal policies to tackle the country’s current economic challenges,” Trump said in a statement after speaking with Macri.
The Argentine peso has lost half its value against the US dollar this year, hampering government efforts to get inflation under control.
Argentina has already used a first US$15 billion tranche of the three-year line of credit agreed in June, mainly to prop up its currency.
Andres Abadia of Buenos Aires consultancy Pantheon said Argentina’s austerity measures “should be seen as a positive, but market confidence in Argentina remains fragile.”
“The meeting with the IMF will probably help to have a clearer picture of the country’s prospects,” Abadia added.
The Washington talks came a day after Macri announced he is slashing the number of government ministries by half and restoring a tax on booming grain exports to bring deficits under control.
The move signaled the abandonment of a gradualist approach to reducing inflation by the market-friendly president, who was elected in 2015.
“We must move a lot faster,” Marci said in a televised address. “We know that this is a bad tax, but I have to ask them to understand that it is an emergency and we need their contribution.”
At the current exchange rate, the move would put an extra US$7.1 billion in state coffers.
Twelve of Argentina’s 22 government ministries will be closed or merged under the measures, including two key portfolios, health and labor.
Santiago Ponce, a Ministry of Labor employee, said slashing the government was a bad sign.
“Halving ministries implies a really dire situation for the public administration and the state. They are reducing the state, they are shrinking it, the state is losing its power to regulate,” he said.
Argentina has already pledged to cut its budget deficit to 1.3 percent of GDP next year, but at a news conference on Monday prior to leaving for Washington, Dujovne said it would go further next year and eliminate its primary deficit — its borrowing needs before debt servicing.
“In 2019, we want to reach primary fiscal equilibrium, and by lowering the deficit, we will lower our need to issue debt,” he said.
The current deficit target for this year is 2.7 percent of GDP.
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