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ECONOMY | 29-02-2024 12:20

Argentina's government is talking with IMF about new programme outline

Argentina, IMF in talks about outline of possible new programme to speed up exit from capital controls.

Argentina is talking with the International Monetary Fund about the outline of a possible new programme that would bring fresh cash to speed up its exit from capital controls, according to a senior government official.

The Fund is pushing the government to let the currency devalue faster under its so-called “crawling peg,” and keep interest rates above inflation, currently running around 250 percent, the official said, asking not to be identified discussing sensitive talks.

Argentina’s government, under newly elected President Javier Milei, says it wants to get rid of the country’s capital controls, and more IMF money offers the fastest route to that. 

Economy Minister Luis Caputo has denied any negotiations with the Fund at the moment, adding however that the Washington-based lender is “open to exploring a new programme.”

An IMF official said it’s too early to discuss precise programme modalities.

Milei is under pressure just months into his Presidency, with the economy shrinking and prices soaring. Argentina already owes the IMF some US$44 billion, the legacy of an earlier programme that went off track. 

Argentine officials met with IMF Managing Director Kristalina Georgieva Wednesday on the sidelines of the G20 finance ministers meeting in São Paulo. 

Georgieva’s top deputy, Gita Gopinath, met with Milei in Buenos Aires last week too, but denied in interviews with Argentine newspapers that she discussed a new programme.

As officials weigh whether to pursue a new programme, Argentina is careening into another recession with an inflation rate that’s one of the highest in the world. While Milei enjoys ample IMF support and praise from international investors, he’s facing growing resistance on the ground from labour unions and Congress over the aggressive spending cuts at the centre of his agenda.

A new programme would be Argentina’s 23rd agreement with the IMF in a long history of deals that have failed to put the crisis-prone economy on a sustainable path. Milei inherited the current IMF programme from his predecessor Alberto Fernández, whose government routinely missed targets laid out in the plan. The IMF approved waivers and continued to disburse money.

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by Manuela Tobias, Bloomberg

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