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ARGENTINA | 10-04-2024 17:59

‘No alternative’ to austerity in Argentina, says top World Bank official

Economist William Maloney comes out in support of Milei’s government’s reform plans; World Bank says Argentina's economy will decline 2.8% in 2024.

Top World Bank official William F. Maloney says the institution is supportive of President Javier Milei’s government and in favour of strong cuts in public spending in Argentina, 

Maloney, chief economist for Latin America and the Caribbean at the World Bank, argued in an interview that there is “no alternative” to the President's plan to achieve fiscal balance, highlighting the importance of slowing inflation and supporting the most vulnerable.

Milei’s plans are “sensible,” provided that the most vulnerable are not neglected, said the official. “There’s no alternative” to a heavy fiscal adjustment, Maloney told the AFP news agency in an interview.  

The Argentine leader’s fiscal adjustment, which includes a sharp reduction in the public expenditure, the privatisation of state companies and the closing of government agencies and institutes, has been accompanied by a devaluation of the peso that further stoked inflation, now running at around 280 percent year-on-year.

A World Bank report forecasts that economic activity will decline by 2.8 percent this year in Argentina, a downgrade on an earlier estimate.

Protests are multiplying with citizens who can see austerity affecting their pockets. A number of government regulations have been removed by decree, along with the removal of subsidies for utilities and public transport.

 

Does the World Bank continue to support Milei’s plans, despite their social cost?

“Yes, the reforms are sensible,” said Maloney, but there must be aid “for the most vulnerable.”

He continued: “I believe fiscal balance to be the right path. It’s a pre-condition for growth and for any society to have stability. There’s no alternative.

“Argentina has some long overdue fiscal adjustment. That’s what’s driving inflation.

“The question is how we can achieve the fiscal adjustment while we support the most vulnerable population in the country, and the [World Bank] is currently having talks specifically about that type of support mechanism.”



How will this aid be finalised?

“The [World] Bank is talking to the government right now and we’re exploring ways to bring aid, in terms of efficiency of social protection and strengthening support programmes for food and employment.”



How long do you estimate the austerity will last?

“The adjustment time depends very much on the confidence the population has that it will be sustainable.”

It also depends “on how fast the policies and credibility have been implemented, [which is why] “it’s important for Congress to support society.”

 

President Milei has forecast two years of sacrifice ahead. Do you believe it would be better to ask for a shorter-lasting adjustment, even given the response of the markets?


In general, “the faster measures come … the better.”

 

Could the country become a success story from this or do you find that ridiculous?

“Absolutely. Argentina has talent, human capital, plenty of well-developed industry, and a first-rate agricultural sector. But there’s no country in the world that can grow with that inflation and volatility.”

He concluded: “Argentina, like any other country, has to achieve macroeconomic stability, [because] it’s a pre-condition for sustainable growth.”


– TIMES/AFP

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