IMF official highlights importance of BCRA in tackling inflation

IMF official highlights importance of BCRA in tackling inflation

International Monetary Fund (IMF) Communications Director Julie Kozack Thursday insisted during a press conference at the agency’s headquarters in Washington that Argentina must have a “strong and credible” Central Bank to reduce inflation under future President Javier Milei. In Kozack’s view, high prices are one of the most important imbalances the country needs to tackle.

Asked about the possible impact of Santiago Bausili’s appointment to head Argentina’s Central Bank (BCRA) despite his closeness to future Economy Minister Luis ‘Toto’ Caputo, Kozack focused on the need for a “politically backed stabilization plan to address Argentina’s macroeconomic imbalances,” thus dodging a direct answer to the question of financial independence.

“The economic situation in Argentina remains challenging and very complex. Inflation is very high and reserves are extremely low. And this, of course, occurs in the context of very fragile social conditions,” Kozack pointed out.

Milei will need to renegotiate with the IMF a US$ 46 billion deal Argentina has technically defaulted on by failing to meet fiscal, reserve accumulation, and treasury financing cap targets established in the agreement for the IMF to make quarterly disbursements that allow the country to pay its maturities.

On Nov. 28, Caputo and a team of Milei’s future aides met in Washington with IMF officials. “The discussion focused on better understanding the incoming authorities’ plans to urgently restore macroeconomic stability, as well as their plans for reforms to boost Argentina’s medium-term growth prospects,” Kozack explained. Following the meeting, positive discussions ensued “at a technical level,” she added.

Kozack also recalled that IMF Managing Director Kristalina Georgieva spoke a few days ago by phone with Milei and the two had “a constructive meeting” during which she “underscored her commitment to strengthening public finances to reduce inflation and create a more prosperous, private sector-led economy.” IMF Deputy Managing Director Gita Gopinath met with Caputo last week in Washington.