The Latin American country is heading towards 200% inflation amid the worst economic crisis in decades
President Javier Milei is delivering his speech following his inauguration ceremony at the National Congress in Buenos Aires, Argentina, on December 10, 2023. © Marina Espeche / NurPhoto via Getty Images
The International monetary Fund (IMF) has agreed to unlock $4.7 billion for Argentina as part of a debt restructuring plan even though the country missed targets related to its $43 billion loan program, the fund announced on Wednesday.
Argentina’s foreign currency reserves have been nearly wiped out amid the worst economic crisis in 20 years. Latin America’s third-largest economy is facing severe challenges after decades of debt and financial mismanagement, with inflation heading toward 200% year-on-year and 40% of Argentinians living in poverty.
“The new administration is already implementing an ambitious stabilization plan, anchored on a large upfront fiscal consolidation, along with actions to rebuild reserves, correct relative price misalignments, strengthen the central bank’s balance sheet, and create a simpler, rules-based, and market-oriented economy,” the IMF said in a statement.
The agreement is due to be approved by the IMF’s executive board in the coming weeks.
Argentina’s new economy minister, Luis Caputo, a former Wall Street trader, explained that the agreement did not represent a new deal but stressed that the IMF had expressed a willingness to offer a new debt program and additional funding.
With this deal, Argentina’s new president, Javier Milei, who describes himself as an anarcho-capitalist, puts back on track a $44 billion bailout package with the IMF that dates back to 2018.
Milei began implementing his economic “shock therapy” shortly after his inauguration in December by presenting a package of sweeping reforms to Congress. Among other measures, he sought to privatize more than 40 public companies in an effort to “dismantle the enormous amount of regulations that have impeded” economic growth.
Argentina’s new government announced last month a 54% devaluation of the peso against the US dollar, cuts to energy and transportation subsidies, and a freeze in spending on some major state programs.
Milei’s austerity measures also include tax increases in a bid to reach a primary budget surplus this year, cancellation of tenders for public works projects, and plans to axe nine government ministries.
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