The executive board of the International Monetary Fund (IMF) approved Friday an expansion on Argentina’s US$50 billion loan and the early release of funds in exchange for greater cutbacks in public spending, including a reform on the pension system, and more space for IMF invention.
The announcement was made shortly after the lower chamber of Congress approved the IMF-backed 2019 budget, despite widespread opposition from social movements and organizations that reject planned cuts for public education (23 percent) and health (eight percent) outside Congress.
The agreement, which adds US$6.3 billion to the initial loan and secures the disbursement of almost 90 percent of the loan until before the 2019 presidential elections, was announced on Sept. 26 by IMF chief Christine Lagarde and Argentina’s Treasury Minister Nicolas Dujovne in New York but required the formal approval of the IMF’s executive board.
The government of president Mauricio Macri, who confirmed he would run in the 2019 elections, anticipates there will be a two-percent decrease in economic activity next year and that the government will push for a new reform to the pension system.
Last December, the Argentine government successfully pushed for pension reforms that affected retirees and people who receive non-contributive pensions and family allowances by changing the formula used to increase pensions and allowances. The reforms were rejected in the streets but the government repressed dissent and Congress finally approved the executive's proposal.
Pensioners have already been severely affected by rising inflation and devaluation of their currency, the peso.
Macri’s government also committed to an “anti-inflationary monetary policy” that will prevent the government from issuing currency and from intervening in a floating exchange rate in a climate of the rapid devaluation of the Argentine peso, which has undermined purchasing power and “annihilated” salaries. Since the beginning of 2018, the Argentine peso has lost 50 percent of its value.
In the official statement, the board praised the unpopular economic and social policies adopted by the government. "Argentina’s strengthened economic plan aims to bolster confidence and stabilize the economy through a reduction in the budget deficit, the adoption of a simpler monetary policy framework, and freely floating the exchange rate (with foreign currency intervention limited to cases of an extreme overshooting of the currency). Protecting the most vulnerable in Argentina continues to be a central component of the authorities’ efforts," it reads.
According to Infobae, last week minister Dujovne told a group of businessmen that Argentina had guaranteed the payment of interests on acquired debt.