The International Monetary Fund published a sombre review of its most recent programme that failed in Argentina, finishing a technical step needed before President Javier Milei negotiates a new agreement this year.
IMF staff published late Friday an evaluation of Argentina’s programme that originally totalled US$44 billion, the lender’s second-largest programme in history only behind its 2018 deal with the nation. By IMF rules, a country with “exceptional access” to IMF money like Argentina’s programme can’t seek a new programme until the so-called ex-post evaluation of the previous program finishes.
IMF Chief Spokeswoman Julie Kozack confirmed in December that negotiations have begun on a new programme, which would be Argentina’s third deal in a saga now stretching on seven years. Separately, Argentine Economy Minister Luis Caputo has said he hopes to reach an agreement within the first four months of 2025.
Markets are keenly watching Caputo’s negotiations with IMF staff to see if the lender will provide fresh funding beyond US$44 billion, as well as how and when Argentina decides to lift its framework of currency and capital controls that prevent it from returning to international markets. Both issues are central to ongoing negotiations.
The ex-post evaluation painted a grim picture of Argentina’s latest IMF programme that began in March 2022. Staff detailed reckless policy decisions by the government of former president Alberto Fernández that derailed the programme and economy in the run-up to the 2023 presidential election that Milei won in a landslide.
By mid-2023, “the programme was almost stopped,” after “commitments were repeatedly reneged on, and the authorities’ policies veered significantly off course ahead of the multi-stage electoral process,” according to the evaluation.
“In sum, Argentina again faced a full-blown economic crisis by the time of the final round of the election,” according to the report.
After two years of talks, the 2022 programme never had the widespread support IMF staff sought as Argentina went through three economy ministers in roughly a month. Although Fernández supported a new law that congress would have to approve the IMF deal, factions of his own Peronist party voted against it, laying bare political infighting that exacerbated an economic meltdown and eventually paved Milei’s way to the presidency.
Since he took office, Milei has faced his own tensions with the IMF as one top staff negotiator already chose to step aside over policy disagreements. However, IMF leadership has largely applauded Milei’s historic austerity campaign that’s helped bring down inflation sooner than expected.
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