Argentina’s biggest creditor, the International Monetary Fund, agreed on Monday to release the next round of loans under the rescue program, backing the government’s tough austerity measures that exceed the terms of the $43 billion loan.
The IMF agreement reassures markets that the government will be able to make its next $792 million payment in June following the completion of a review of Argentina’s compliance record, the worst in two decades. Bankers are gaining confidence in Argentina’s prospects for facing an economic crisis. .
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The decision by the Fund’s technical staff still requires final approval from the IMF’s Executive Board, which could take several weeks.
Argentina’s annual inflation rate reached 287% in March, the highest in the world, deepening poverty and intensifying strikes and protests. But the IMF praised a number of economic successes by President Javier Millay’s liberal government, including Argentina’s first quarterly budget surplus in 16 years, lower monthly inflation rates and soaring debt prices.
To revive the struggling economy, Milley slashed public sector wages, cut thousands of state jobs, froze public services and cut subsidies. He also devalued the plummeting peso currency by more than 50%, helping to stabilize it but driving up the prices of basic goods.
Argentina’s President Javier Millei speaks during a ceremony commemorating Holocaust and Heroes Day in Buenos Aires, Argentina, Wednesday, May 8, 2024. (AP Photo/Natasha Pisarenko)
Although brutal for Argentina’s poor and middle class, the market-friendly reforms “made faster-than-expected progress in restoring macroeconomic stability and putting the program firmly back on track,” the IMF said. thanked the Argentine authorities for their “resolute implementation”. About their stabilization plans. ”
The praise marks a dramatic shift from the past 60 years, when Argentine politicians showed little interest in implementing reforms set out as part of borrowing agreements.
The country’s IMF program, which began in 2018 and will be refinanced in 2022, has reached a breaking point, with the previous leftist government falling well short of IMF targets and relying on central bank money printing to finance state spending. .
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The international financial institution remains deeply unpopular in Argentina, with citizens blaming it for the country’s economic collapse and debt defaults in late 2001. The IMF later acknowledged mistakes that contributed to Argentina’s collapse.
It is rare for a country to have the IMF as its largest creditor. Argentina is in the strange position of being dependent on funds lent by the Fund to repay the Fund itself.
