The head of the International Monetary Fund on Thursday said an agreement reached in principle with Argentina on a new standby loan was “pragmatic” but “hard work” still lay ahead.
Managing Director Kristalina Georgieva told reporters that details of the program were still being worked out, and the global lender recognized the limitations of what could be done, citing political opposition immediately after the announcement.
The main focus, she said, was to get Argentina out of “this very dangerous path of high inflation,” adding that the staff agreement being worked out now would also include structural conditions aimed at ensuring Argentina raised its tax revenues and boosted transparency of public spending.
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Argentina and the IMF on Friday said they had reached an understanding about a new $44.5 billion standby deal, a major breakthrough that came after over a year of tense talks about restructuring loans the country cannot repay.
The new deal has been sharply criticized, including by Maximo Kirchner, a prominent Argentine lawmaker, and son of Vice President Cristina Fernandez, who broke ranks with the ruling party on Monday.
Argentine President Alberto Fernandez and his government have been negotiating with the IMF to revamp debt outstanding from a failed $57 billion loan deal from 2018, the fund’s largest ever.
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Argentina‘s dollar bond prices fell slightly on Thursday, hanging on to most gains since the understanding was announced, but not far from record lows and in deeply distressed territory. The bond maturing in 2029 is priced at 35 cents on the dollar, with a yield of 24%.
Asked if the IMF was repeating mistakes made in 2018 by accepting conditions on deficit reduction and a lack of firm commitment to phase out energy subsidies, Georgieva said: “As you can imagine, this is something we are debating, we have been debating and we will continue to debate at the fund.”
But she said the agreement in principle had factored in lessons learned from the failed 2018 deal, and IMF staff were focused on lowering inflation.
“We are confident that this is a pragmatic program that … provided it is implemented, and if necessary, adjusted as we go … would help Argentina to deal with the most significant structural problems,” Georgieva said.
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Further structural adjustments could be agreed later, she said.
The IMF’s objective was to reduce Argentina‘s deficit to zero by 2025 and support the government to “finally take a key step on energy subsidies that have been quite generous,” with additional conditions to be included in the staff agreement on the deal now being worked out, Georgieva said.
“We also recognize the limitations of what can be done over the next years,” she said. “So we have to calibrate the program to be implementable.”
The government did not immediately respond to a request for comment.