International Monetary Fund (IMF) staff and Argentine authorities announced Monday they have reached an agreement on the third review of the economic program supported by the Stand-By Arrangement, releasing approximately US$11 billion more part of the three-year loan.
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“Subject to the approval of the Executive Board, Argentina would have access to about US$10.87 billion. The Executive Board’s review is expected in the coming weeks,” said in statement Roberto Cardarelli, who led the IMF mission to Argentina from Feb. 11 to 22, 2019. Argentina already received US$15 billion in 2018 and will have access to the rest by the end of 2019.
However, the IMF has requested President Mauricio Macri’s government that more austerity measures are in order, “achieving a zero primary deficit in 2019 will require further restraint in government spending”, read the statement.
This new requirement comes as Argentina continues in a tough recession, with an interannual inflation rate of 51,2% by February 2019 and a devaluation of the peso, that lost half its value against the dollar in 2018. The government has decided to implement zero growth in the monetary base until June 2019 and to lessen the pace at which the edges of the non-intervention zone will increase.
A course of action the international body has praised by saying that “tightening the monetary framework will contribute to bringing down inflation and re-anchoring inflation expectations.”
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However, the burden of these measures keeping falling on the poorest segments of the population. Food prices in February 2019 have risen on average 53 percent, transportation rates 67,3 percent, and housing, water, electricity, and gas prices have increased by 48,7 percent, compared to the same month last year.
Argentines have taken on the streets to protest these high prices around the country, especially in Buenos Aires. On Feb. 13, over a million mobilize under the "Land, Housing and Work" slogan, to denounce the government's economic policies. On Monday’s statement, the IMF said, that it “strongly supports the authorities’ efforts to mitigate the social impact of the needed stabilization policies.”
Yet the country continues on a downward spiral reminiscent of the 2001-2002 crisis. The government statistics bureau said the economy contracted 3.5 percent in the third quarter of 2018 and plunged 7.5 percent in November 2018 alone. The IMF estimated Argentina's economy fell by 2.6 percent in 2018 and will drop another 1.6 percent in 2019, yet believe there are “good prospects for a gradual recovery.”
According to a local media outlet, Pagina 12, opposition party members have said that if they win in next October’s presidential elections they will renegotiate the US$56.3 billion deal, which is the biggest loan in IMF’s history.