Progress in Argentina-IMF talks to speed up loan

Consumers in Buenos Aires says they are finding it difficult to make ends meet as the peso devalues and inflation ticks up.
Argentina's Treasury Minister Nicolas Dujovne at a press conference in Washington on Tuesday, following talks with IMF managing director Christine Lagarde.
Argentina's Treasury Minister Nicolas Dujovne at a press conference in Washington on Tuesday, following talks with IMF managing director Christine Lagarde.PHOTO: BLOOMBERG

Country seeking faster release of $69b to calm its economic crisis

Argentina "made progress" on Tuesday in talks with the International Monetary Fund (IMF) aimed at securing an accelerated disbursement of a US$50 billion (S$68.9 billion) loan it hopes will calm its debilitating economic crisis.

IMF managing director Christine Lagarde said she and Argentina's Treasury Minister Nicolas Dujovne held "discussions about how the Fund can best support Argentina in the face of renewed financial volatility and a challenging economic environment".

Ms Lagarde said talks would continue, aiming to reach "a rapid conclusion to present a proposal to the IMF Executive Board". Mr Dujovne said it was too early to "give figures when we're in the middle of discussions with authorities".

Earlier, US President Donald Trump expressed "strong support" for Argentina, whose President Mauricio Macri has announced plans to slash the country's bureaucracy and raise taxes on exports to calm battered financial and currency markets and get the economy back on an even keel.

"I have confidence in President Macri's leadership, and I strongly encourage and support his engagement with the International Monetary Fund to strengthen Argentina's monetary and fiscal policies to tackle the country's current economic challenges," Mr Trump said after speaking with Mr Macri.

The peso has lost half its value against the US dollar this year, hampering government efforts to get inflation under control. Argentina has already used a first US$15 billion tranche of the three-year line of credit agreed in June, mainly to prop up its currency.

Analysts warned that failure to reset the terms of the IMF loan would be costly. "Failure to secure further IMF funding or fiscal slippage before large debt repayments due in November would make default a very real possibility," said Capital Economics in a note.

Mr Andres Abadia of Buenos Aires consultancy Pantheon said Argentina's austerity measures "should be seen as a positive, but market confidence in Argentina remains fragile". He added that "the meeting with the IMF will probably help to have a clearer picture of the country's prospects".

The Washington talks come a day after Mr Macri announced he is slashing the number of government ministries by half and restoring a tax on booming grain exports to bring deficits under control.

The move signalled the abandonment of a gradualist approach to reducing inflation by the market-friendly President, who was elected in 2015. Mr Macri, a centre-right politician elected on a commitment to economic reform, appealed to rich exporters to do their bit. "We know that this is a bad tax, but I have to ask them to understand that it is an emergency and we need their contribution," he said.

At the current exchange rate, the move would put an extra US$7.1 billion in state coffers.

AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on September 06, 2018, with the headline 'Progress in Argentina-IMF talks to speed up loan'. Print Edition | Subscribe