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We are not discussing a new program with Argentina

He International Monetary Fund (IMF) does not negotiate a new program with Argentina, beyond the loan of US$44,000 million that the country has contracted, declared this Thursday the director of the financial organization, Kristalina Georgieva.

“At this point we are not discussing a new program,” Georgieva said at a press conference, a day after the fund’s executive board gave the green light for the disbursement of $4.7 billion corresponding to the seventh review of the credit agreement.

“Given the ambition they showed when we discussed the seventh review, it seemed like review number one, because there is a drastically different approach,” he said, praising the president’s plans. Javier Milei.

In a country with triple-digit inflation, virtually no reserves and rampant poverty, “we fully support the decision to address these problems with more ambition than we have seen in previous years and tell the truth to the people,” he declared.

“What I can tell you is that so far we have seen a good team” and “a very pragmatic president, not ideologically limited” but rather looking for “ways for the country to get out of this difficulty,” he added.

The director of the Fund applauds the idea of ​​​​eliminating multiple exchange rates, avoiding monetary financing by the central bank and establishing a primary fiscal surplus objective of approximately 2% of GDP this year, that is, before paying interest on Debt.

He also welcomes the decision made last week to withdraw a “fiscal chapter” from his controversial omnibus reform law, with which he sought to ensure “zero deficit” in the fiscal accounts.

“It was a pragmatic decision, you move towards where you have more consensus,” said Georgieva, who assures that the IMF has analyzed its consequences on the objectives set and are “satisfied that a contingency plan exists.”

“What is very clear is that overcoming this difficult year will require more contingency planning and more agility and adaptability,” he stressed, however.

“There are risks,” he warns, because “overcoming a great transformation, the Big Bang change, is never easy.”

Dollar, tariffs and stagflation in the short term, the details of the IMF report on Argentina

The IMF staff report points out among its considerations, releasing exchange restrictions, the need to adjust public rates and warns that the economy will enter a process of stagflation in the short term. He expects inflation to gradually decline and activity to begin to recover by the end of the year.

It is worth remembering that, in the WEO, it was established that Argentina this year will face a GDP drop of 2.8% but that in 2025 there will be an expansion of activity of around 5%. Likewise, that Inflation this year will be 150%.

It describes the inheritance received, which highlights the increase in poverty, the deterioration of real wages, which are 23% below 2016 levels.

Regarding the external debt, it evaluates it “sustainable, but not with high probability.” The fiscal adjustment measures that include updating of tariffs, adjustments in public administration, structural reforms of the economy.

Below are the main definitions:

Dollar and release from the stocks

  • Following a major realignment of the exchange rate, exchange rate policy will continue to be carefully calibrated to ensure a decisive reserve accumulation trend.
  • Before the great devaluation of December, of approximately 120%, it was estimated that the real exchange rate was between 35% and 40% stronger than the level implied by medium-term fundamentals.
  • The devaluation (which moved the nominal official exchange rate from 360 ARS/USD to 800 ARS/USD) allowedeither an initial real excess, which has been essential to immediately rebuild reserves and avoid a balance of payments crisis.
  • Following the exchange rate overshoot, authorities set the initial official devaluation rate at 2% per month to help anchor inflation, while communicating that fiscal policy remained their main policy anchor.
  • Looking ahead, the authorities agreed that exchange rate policy would evolve in a manner consistent with reserve accumulation objectives that avoids a rapid erosion of previous competitiveness gains, while the new monetary policy anchor would take on the role of anchoring the inflation.

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