Between the war in Ukraine and the risk of an epidemic recovery, the country is facing many social and economic challenges.
The IMF on Friday approved a $44 billion aid package for Argentina, with an immediate disbursement of $9.65 billion, but it stresses “exceptionally high riskssurrounding its implementation in the context of the war in Ukraine. Negotiated since August 2020, this new agreement is a real lifeline for Buenos Aires. The previous government (center right) had contracted a record loan of 57 billion dollars in 2018. But struggling to repay its maturities, the second economy of South America risked default.
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“This is an important step forward for Argentina in the process of macroeconomic stabilization, which allows the country to continue creating the conditions to be able to continue the strong economic recovery.” current, said the Argentine Minister of Economy Martin Guzman to AFP in Paris. For him, who met the Paris Club and the International Energy Agency (IEA) in France, the refinancing of the debts of 2018 and 2019 will allow a “greater stability» and will stimulate «investment growth“, as well as “the recovery of employment and production“. The new aid plan, for a period of 30 months, granted under “extended credit facilityof the International Monetary Fund, should enable Argentina to “strengthen debt sustainability, fight high inflation, increase reserves, close the country’s social gaps“, explained the institution.
If the economic and employment recovery is on track after the crisis caused by the Covid-19 pandemic, Argentina “continues to face exceptional economic and social challenges“Nevertheless underlined the managing director of the IMF Kristalina Georgieva. And quote “depressed per capita income, high levels of poverty, persistently high inflation, heavy debt burden and low external reserves“.
Even before the pandemic, the poverty rate was close to 36%, according to IMF data. Kristalina Georgieva believes that the economic program which has been drawn up by the Argentine government and which is supported by the Fund “sets pragmatic and realistic goals and credible policies to strengthen macroeconomic stability“. The program should thus make it possible to consolidate the Argentine budget and support growth, which will make it possible to strengthen debt sustainability and control “persistent and high inflation“.
Need for apolitical and social consensus»
However, the boss of the IMF observes that “a strong political and social consensus is essential to support the implementation of the reform program“. The Argentine Congress gave its approval last week to this loan amount. On the other hand, he did not vote on the macroeconomic policies themselves. Despite political friction, an IMF official, who requested anonymity, said “quite confidenton this program. Kristalina Georgieva acknowledged that the risks were “exceptionally highas the fallout from the war in Ukraine is already materializing.
“The recent dramatic rise in geopolitical tensions heightens uncertainty over the global outlook for growth, inflation, commodity prices and capital flows, with significant potential implications for Argentina and for the program“, note the economists of the IMF in a report published Friday evening. They also note that a resumption of the pandemic is not excluded, not to mention the tightening of global financial conditions and climatic shocks. “Additionally, the program may fail to engender trust and, over time, build stability, especially if political support for the program wanes, including ahead of the October 2023 presidential election.“, warn the authors of the report.
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“In this context, early recalibration of the program, including the identification and adoption of appropriate measures, as needed, will be essential to achieve the program objectives.“, advocated Kristalina Georgieva. The IMF official, who did not wish to be identified, said a first review of the program should take place as early as mid-May. However, he did not give a date on a possible mission to the country.