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IMF-ARGENTINA-ECONOMY-DEBT
IMF board approves increased loan package for Argentina
WASHINGTON, Oct 27, 2018 (BSS/AFP) – The International Monetary Fund
executive board on Friday approved an increased loan package for Argentina
worth $56 billion to help stabilize the crisis-battered country’s economy and
currency.
The IMF said the approval released $5.7 billion to the government
immediately, but it also includes tougher conditions.
The country secured a $50 billion IMF loan in June, and had received $15
billion already, but as conditions worsened Buenos Aires had to go back to
the lender for additional support with faster disbursement.
With the latest installment, the IMF has released just over $20 billion to
President Mauricio Macri’s government.
“Despite the challenging environment the government has proactively
strengthened its policy plans,” IMF Managing Director Christine Lagarde said
in a statement.
Argentina’s woes were brought on by a rapid loss of confidence in its
currency from April, which exacerbated the downturn already underway due to
the severe drought.
The peso has lost around 50 percent of its value against the dollar since
the start of the year, including 20 percent in a two-day period in August
after Macri announced he was seeking to renegotiate the IMF loan.
The beefed up three-year loan package requires government spending cuts
and changes to central bank policy, including moves to choke off inflation
and allowing the currency to move freely, but authorities will be able to
intervene if the peso falls to steeply.
Macri has introduced hugely unpopular austerity measures, including
halving the number of government ministries and restoring taxes on grain
exports.
The IMF stressed that the package includes a “floor” on spending for
social programs.
“Protecting the most vulnerable in Argentina continues to be a central
component,” and the government would “increase in spending on social
assistance programs in the event that social conditions deteriorate,” the IMF
said.
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IMF-ARGENTINA-ECONOMY-DEBT 2 LAST WASHINGTON
– Austerity budget –
The IMF loan announcement came the day after Argentina’s lower house of
Congress passed an unpopular austerity budget, which now goes to the Senate
where it is expected to win final approval.
The final pre-dawn vote came after a marathon, rancorous debate and a day
of unrest that saw police fire tear gas and rubber bullets at demonstrators
throwing rocks outside the legislature to protest a bitter cocktail of tax
increases and spending cuts.
Macri has pledged to enact a series of cuts in health, education, science,
transportation, public works and culture to the tune of $10 billion.
The budget deficit was 3.9 percent of GDP last year. The government aims
to get it down to 2.7 percent in 2018 and zero by the end of next year.
The IMF estimates the economy will contract by 2.6 percent this year with
inflation of almost 32 percent.
An IMF official told reporters the deterioration of the currency led to a
surge in the country’s debt burden to 81 percent of GDP. But as the peso
stabilizes and with the spending cuts the aim is to bring that down to below
60 percent by 2023.
The official noted that the peso was overvalued and now was “much closer
to fair value in terms of fundamentals.”
The currency was trading at about 37.93 to the dollar on Friday.
Argentina’s Finance Ministry has said the agreement with the IMF’s
executive board includes a commitment to maintain spending on social programs
to more than 1.2 percent of gross domestic product in order to protect the
most vulnerable sectors.
More than 27 percent of the population are listed as living below the
poverty line and the South American country has an unemployment rate of 9.6
percent.
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