Monday, April 15, 2024

ECONOMY | 23-02-2024 09:30

IMF deputy chief says Argentina needs 'consistent' monetary, exchange policy

International Monetary Fund second-in-command Gita Gopinath said Argentina's government is making significant efforts to "restore macroeconomic stability" after meeting with President Javier Milei.

The second-in-command of the International Monetary Fund, Gita Gopinath, met with President Javier Milei on Thursday, before calling on Argentina’s government to continue its programme to  "restore macroeconomic stability."

Gopinath, the IMF’s deputy managing director, said Argentina needed a “consistent and well communicated monetary and exchange rate policy” in order to “further reduce inflation, rebuild reserves and reinforce credibility."

The economist also said it is "essential" that the government maintain measures to support vulnerable citizens and preserve the real value of social assistance and pensions.

The meeting with Milei took place on the second day of the IMF deputy’s visit to Buenos Aires.

Gopinath spent some four hours with Economy Minister Luis Caputo, Central Bank Governor Santiago Bausili and Cabinet Chief Nicolás Posse on Wednesday.

"Over the past few days, I have been able to learn more about the progress being made, but also the hardships the Argentine people are now facing. I heard first-hand from a wide range of stakeholders who shared their ideas on how to address the country’s challenges and harness its vast potential," said the IMF deputy in a statement.

“In my meetings with President Milei and his economic team, I recognised the important initial gains in restoring macroeconomic stability and establishing a strong fiscal anchor. The path ahead remains challenging, and consistent and well-communicated monetary and FX policy will be necessary to continue to bring down inflation, rebuild reserves, and strengthen credibility," she continued.

Talks with Argentine officials focused on Argentina’s US$44.5-billion credit programme with the Fund and assessing the government’s compliance with it ahead of an upcoming quarterly review.

"I had a productive discussion with Caputo, Bausili and Posse on the efforts underway to restore macroeconomic stability, protect the vulnerable and strengthen Argentina's growth prospects," the Fund official posted on X on Wednesday.

The three officials outlined the results of January's management of the economy, government sources said. Argentina recorded a trade surplus of US$797 million and the government a fiscal surplus of US$588 million, the Télam state agency reported.

Gopinath, 52, met with government officials, academics and representatives of social organisations and trade unions while in Buenos Aires. She also met with the leaders of the CGT umbrella union grouping.

Social tension and unrest is rising as protests grow in response to the first measures of President Milei’s government. During the first day of her visit, Argentina's railway workers walked off the job in protest, paralysing trains nationwide. Teachers have called a strike to coincide with the beginning of the school year and healthcare workers staged a demonstration on Thursday.

Before leaving on Thursday for the G20 meeting in Rio de Janeiro, the IMF’s number two spoke with Milei about his plans, which the IMF have described as "bold" and "challenging.”

"Excellent and substantive meeting with President Javier Milei on how best to take the country forward," wrote Gopinath in post on social media on Thursday.

In 2018, during former president Mauricio Macri’s government, Argentina borrowed US$57 billion from the IMF, of which it eventually drew more than US$44 billion. The agreement was renegotiated in 2022 by Peronist leader Alberto Fernández, and after non-compliance with goals in 2023, has been re-floated by the Milei government.

Milei has moved to carry out a strong fiscal adjustment, higher than the level even recommended by the IMF itself. He has vowed to end 2024 with a fiscal surplus of three percent of GDP. 

Speculation in Argentina is growing that the Milei administration may seek a new programme with the Fund to replace its existing credit line.

When it approved the latest disbursement of funds for Argentina, the IMF praised Milei’s “ambitious stabilisation plan” that hopes to reverse an annual inflation of 254.2 percent. Poverty affects half the population and a 2.8-percent contraction of GDP for 2024 has been forecast by Fund’s technicians.

However, the IMF has warned the government that the president’s plan requires “clear communication” and protection for the most vulnerable.

Gopinath arrived on the day national railway workers brought the network to a halt in a nationwide strike. In the coming days, healthcare and education unions have also announced strikes to demand wage increases.



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