© Reuters. FILE PHOTO: The headquarters of the International Monetary Fund is seen during the group’s Annual Meetings in Washington, U.S., October 12, 2022. REUTERS/James Lawler Duggan//File Photo
By Rodrigo Campos and Jorgelina do Rosario
NEW YORK/LONDON (Reuters) -The International Monetary Fund said Argentina is committed to accumulating international reserves and stemming a central bank financing of government debt under the latest review of its $44 billion loan program, as the global lender backed a set of reforms proposed by President Javier Milei’s new administration.
The IMF called Milei’s stabilization plan for Argentina’s embattled economy “bold” and “far more ambitious” than those put forth by his predecessors in the South American country, citing the reform mandate of his landslide election victory late last year as a positive given the challenges of its implementation.
“The authorities’ strong ownership and electoral mandate to eliminate fiscal deficits and long-standing impediments to growth (many benefiting vested interests) mitigate implementation risks,” the IMF said in a staff report on Argentina published on Thursday.
Yet the IMF acknowledged that risks to the program’s success are high, given the “very difficult inheritance” from failed policies and a “complex political and social backdrop, with a fragmented Congress, falling real wages, and high poverty.”
The fund said Argentina also committed “in the near term” to eliminate “distortive exchange restrictions and multiple currency practices” and to ban central bank credit to the government.
Milei, a right-wing libertarian who became a lightning rod for voter anger last year as Argentina faced its worst economic crisis in decades, faces a major challenge to push an omnibus reform bill through Congress, with his coalition having only a minority in both chambers.
His government yanked a divisive fiscal section from the bill last week to boost support.
The fund expects the economic recovery to gather pace late this year as initial negative macro reaction to the new policies fades, although policy will need to remain tight.
Earlier this week the IMF slashed its forecast for Argentina’s 2024 GDP to a 2.8% contraction from a previous view of a 2.8% expansion, mostly due to the expected effects of the new government’s proposed reforms.
The fund on Thursday highlighted Argentina’s 2024 goal to achieve a primary surplus of 2% of GDP mainly through a combination of temporary taxes and thinning out the cost of running the government, as well as reducing energy and transport subsidies and infrastructure spending.
The IMF review set new central bank reserve accumulation targets, moving to a target of $6.0 billion by the end of March from a previous one of $4.3 billion; the end-June target rose to $9.2 billion from $7.3 billion and the goal for the end of September was set at $7.6 billion.
Wednesday’s board approval and $4.7 billion disbursement brings the current total within the $44 billion program to $40.6 billion, the fund said.
The global lender extended the duration of its $44 billion program by three months to allow for time to implement the government’s current stabilization plan and build out reserves, with the program now running through Dec. 31, from an earlier Sept. 24 cut-off.
The remaining program reviews, as previously reported by Reuters, have been delayed to May, August and November of this year.
