The International Monetary Fund (IMF) has approved the disbursement of US$800 million on Monday, marking the progress of Argentina’s adjustment plan under the leadership of Javier Milei. However, the IMF also issued a warning about potential “imbalances” that could complicate the path to stabilization.
The latest staff report reviewed goals for the first quarter and estimated a deeper recession than initially expected, with activity expected to fall by 3.5%. Monthly inflation is predicted to close around 4%, which represents a slowdown from previous estimates. Despite meeting all goals until March with margins, the IMF warned of persisting macroeconomic imbalances and obstacles to growth.
The government plans to rationalize tax expenditures, consider eliminating some rates, and pass a fiscal package through Congress to support sanitation efforts. Delays in the approval of fiscal measures could undermine the stabilization plan. The economic team is willing to adjust monetary and exchange rate policies to achieve objectives, including cutting subsidies and imposing stricter limits on subsidized electricity.
The plan includes a subsidy cut of 0.7% of GDP and potential new increases in energy rates, indicating ongoing efforts to stabilize the economy. The Fund expects the adjustment to be complemented by these measures to ensure fiscal balance and avoid risks from recession and less favorable export prices.
Despite meeting all goals until March with margins, the IMF warned of persisting macroeconomic imbalances and obstacles to growth. Efforts must continue to expand political and social support for reforms and protect the most vulnerable.
In addition, the government has promised new increases in energy rates and committed to tightening adjustments if necessary. The IMF recommends further reforms in tax policy, retirement systems, income sharing systems.
Overall, while progress has been made in implementing an adjustment plan under Javier Milei’s leadership, challenges remain in achieving sustainable growth and stability in Argentina’s economy.
