Argentine devaluation consistent with IMF guidelines

Argentine devaluation consistent with IMF guidelines

The International Monetary Fund es expected to release over US$ 10 billion to Argentina which might come as some sort of relief following Monday’s decision to devaluate the local peso in the aftermath of the government’s poor performance Sunday at the Open, Mandatory, and Simultaneous Primary (PASO) elections.

”On July 28, the Argentine authorities and IMF staff reached an agreement at the staff level on the fifth and sixth reviews under Argentina’s 30-month Extended Fund Facility (EFF) arrangement. The agreement is subject to approval by the IMF’s executive board, which is expected to meet on August 23 and approve the agreed disbursements,“ IMF Director of Communications Julie Kozack said Monday in a statement.

”We appreciate the authorities’ recent policy actions and commitment to safeguarding stability, rebuilding reserves, and strengthening fiscal order,” she went on.

The Government of President Alberto Fernández and Economy Minister (and presidential candidate) Sergio Massa expects that the IMF may send US$ 7.5 billion. The IMF board of directors is scheduled to meet in the next few days to discuss the approval of the last technical review and to release disbursements. According to Infobae, the amount could be higher, with US$ 7.5 billion in the second half of August, and another US$ 2.5 billion in early November (after the presidential elections where Massa risks not advancing to the runoff).

Monday’s devaluation and interest rate hike are perceived to be consistent with guidelines from the IMF, which insists on cutting the primary deficit beyond the impact of the drought on tax collection. As per an agreement dating back to 2022, Argentina would US$ 44 billion over 30 months in exchange for the central bank increasing its international reserves and the government reducing the fiscal deficit from 3% of Gross Domestic Product in 2021 to 2.5% in 2022, 1.9% in 2023 and 0.9% in 2024.