EconomyIMF chief confident in ‘pragmatic’ Milei despite setbacks

IMF chief confident in ‘pragmatic’ Milei despite setbacks

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IMF managing director Kristalina Georgieva has praised Argentina’s “very pragmatic” president Javier Milei and emphasised the fund’s confidence in his efforts to overhaul the crisis-stricken economy despite a series of political setbacks.

“So far, we have seen a good economic team in place, a very pragmatic president — not ideologically confined, but looking at ways in which the country can move out of this difficulty,” Georgieva told a press briefing in Washington on Thursday, referring to Argentina’s worst economic crisis in two decades.

Milei, a libertarian economist who took office in December, has pledged to slash spending and rebuild central bank reserves to get Argentina’s troubled $44bn loan programme back on track. But local analysts have warned that the political outsider, whose party controls less than 15 per cent of congressional seats, may struggle to enact his plans.

Milei last week withdrew a set of fiscal measures worth about 1.4 per cent of gross domestic product from a reform bill he is trying to push through Argentina’s congress amid stalled negotiations with opposition lawmakers.

The measures were considered crucial to the spending cuts and tax increases equivalent to 5 per cent of GDP that are needed to meet the target of a fiscal surplus of 2 per cent Milei has agreed with the IMF for 2024.

A judge ruled earlier this week that a critical section of a presidential decree issued by Milei in December deregulating Argentina’s labour market was unconstitutional.

Milei’s withdrawal of the fiscal package was “a pragmatic decision”, Georgieva said. “You move where you have more consensus. We also looked at the consequences of this decision on the appropriate targets and we were satisfied that there is a contingency plan in place.”

The stakes of Argentina’s recovery are high for the IMF. Argentina is the fund’s largest debtor, and its package, first agreed in 2018 and refinanced in 2022, had gone “significantly off-track”, Georgieva said in a statement on Wednesday, citing “inconsistent policies” from the previous left-leaning Peronist government.

The IMF’s board approved a $4.7bn disbursement of the loan on Wednesday, granting waivers for a series of targets missed under the previous government.

The fund also agreed to extend the program by three months from its original September 24 end date, delaying reviews to allow Milei more time to meet targets.

The country’s crisis is expected to intensify in the coming months as Argentines feel the impact of Milei’s early reforms, which include a 54 per cent official devaluation of the peso, cuts to energy and transport subsidies, and the removal of price-fixing agreements for food and fuel. Annual inflation in December stood at 211 per cent — the highest in three decades. 

On Tuesday the IMF downgraded its 2024 economic growth prediction for Argentina to a contraction of 2.8 per cent, citing the likely impact of “a significant policy adjustment to restore macroeconomic stability”.

Georgieva, who met Milei in Davos last month, said he had recognised the need for “more social protection” for poorer Argentines.

“We have been backing up the Argentine people. We will continue to do so,” she said. “I’m impressed by how open the president and the government is to advice [and] good policy discussions.”

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