The International Monetary Fund says they are still "evaluating the measures" announced this week by Argentina’s government, with negotiations over changes to the country’s multi-billion-dollar credit-line advancing "to strengthen the reserves of the Central Bank."
"The discussions include strengthening the reserves. We are evaluating the measures. At this moment we continue to discuss ways to strengthen the programme and safeguard stability in the face of the severe drought," the IMF said through a spokesman.
It added: "As we have said previously, this includes policies to improve fiscal sustainability and strengthen reserves, both of which are essential to reduce inflation while protecting the most vulnerable."
Further details of the negotiations continue to emerge. According to an Economy Ministry source cited by the La Nación newspaper, the amount of sums to be advanced by the IMF is no longer under discussion. However, what percentage of those funds can be used to calm exchange markets, within a context of upcoming elections and drought leading to portfolios being dollarised, is still up for debate.
The Economy Ministry is hoping for an advance of all the funds that would have to arrive this year, which would be around US$11 billion.
The IMF's word came as the Economy Ministry launched a new package of economic measures aimed at countering the effects of April's high inflation, which reached 8.4 per cent. The package includes a nine-point reduction in the interest rate of the Ahora 12 plans and the empowerment of the Central Market as an importer.
The measures were defined last Saturday following a meeting between Economy Minister Sergio Massa, his economic team in its entirety and Central Bank Governor Miguel Pesce.
In addition, new steps included raising interest rates from 91 to 97 percent to lure pesos away from the dollar, stepping up intervention on money markets (including the legal but parallel financial exchange rates), easing the import of capital goods and intensifying negotiations with the IMF and China to accelerate the inflow of hard currency, including further incorporation of the yuan option to pay for imports.
This is the third communiqué issued by the organisation headed by Kristalina Georgieva, after the run on the currency at the end of April. In all cases, the IMF made the announcement confirming the joint work to reformulate the agreement signed just over a year ago.
"The drought was a game-changer," admitted Fund deputy managing director Gita Gopinath in a meeting with Massa during his latest trip to Washington early last month.
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"Everything is on the table," the minister said, defining the scope of the possible modifications, which included fiscal targets, the accumulation of reserves and the amount and dates of disbursements.
During a radio interview on Thursday, former economy minister Martín Guzmán made a rare intervention into national politics to criticise recent measures by the government.
Contrasting the strong political support for current minister Massa, Guzmán said that he would not have moved forward with public debt swaps and the so-called ‘soy dollar’ policy if he had remained in office.
He also questioned this week’s rise in interest rates, saying that hikes were “not effective in reducing price rises, as it can lead to greater money printing and therefore an increase in inflation.”
He continued: “We had a very strong dispute with the IMF, which wanted us to raise the interest rate a lot, and I said that inflation is not going to go down.”