FMI hopes Milei’s plan gets enough political support

FMI hopes Milei’s plan gets enough political support

President Javier Milei’s administration “is already implementing an ambitious stabilization plan,” Kozack also noted

International Monetary Fund (IMF) Spokeswoman Julie Kozack Thursday said the global credit agency hoped Argentina’s latest measures would have the political support they needed, particularly the adjustments included in the so-called Omnibus Law bill currently in Congress.

Argentina reached a verbal agreement with the IMF earlier this week which consisted of rekindling the written one from the previous administration of President Alberto Fernández and Economy Minister Sergio Massa which had been technically defaulted for not meeting the fiscal deficit caps.

“There are aspects of this bill that have important fiscal implications and, as such, we expect the authorities to continue to build political support to advance key aspects of this bill,” Kozack said, presumably also with President Javier Milei’s emergency Decree (DNU) 70/2023 in mind. The measure’s final approval is now up to both a Bicameral Congress Commission or the courts. In the meantime as so long as it is not repealed, it is deemed valid in its entirety.

The IMF announced Wednesday that an understanding had been “reached on a set of economic policies that can restore macroeconomic stability in Argentina and put the current program back on track.” It also pointed out that the Argentine Government “moved towards a more market-friendly regime and abandoned the previous policy of intervening in the parallel dollar and futures market in the process of lifting exchange restrictions.”

With this promise, the technical staff led by the Venezuelan Luis Cubeddu returned to Washington to submit its report to the IMF Board of Directors. If the Board approves it, financial assistance to Argentina will be resumed with an immediate disbursement of some US$ 4.7 billion to be applied to impending capital maturities with the organization.

In return, the Government pledged to achieve a primary fiscal surplus of 2% of the country’s GDP; net reserves worth US$ 10 billion and to shut down all monetary issuing this year.

The IMF warnings seek to raise awareness among lawmakers of the consequences of not endorsing Milei’s reforms. Economy Minister Luis Toto Caputo had already said that if the measures are not upheld, more drastic measures would need to be taken, which would be hard on all Argentines.

In this scenario, Kozack hoped the Argentine authorities would “continue building political consensus so that the key points of this regulation are approved.” Regarding social policies, she explained that the package agreed upon “includes an increase in social assistance to protect the most vulnerable in the Argentine economy.”

“The authorities are committed to ending Central Bank financing to the government while strengthening the institution’s balance sheet,” she also underlined.