Argentina issued a decree supporting a new IMF program aimed at managing debts and easing capital controls under President Javier Milei’s administration. This strategic move allows quicker approval in Congress and is necessary for improving the nation’s economic situation amidst ongoing negotiations with the IMF.
On Tuesday, Argentina’s government issued a decree to support a new International Monetary Fund (IMF) program, marking a significant step towards finalizing an agreement that could assist the nation in managing its debts and alleviating capital controls. This decree of necessity and urgency (DNU) stems from the administration of President Javier Milei, who, despite holding a minority in Congress, seeks to advance his agenda through his conservative allies.
Argentina faces economic challenges as it attempts to regain stability under President Milei’s leadership. His aggressive austerity measures aim to rectify longstanding fiscal deficits and mitigate rampant inflation. However, the country’s central bank reserves are critically low amidst impending debt repayments and an approaching mid-term election season, necessitating support from the IMF.
The decree outlines a proposed Extended Fund Facility (EFF) with a repayment term of ten years, incorporating a grace period of four and a half years. While the decree does not specify the amount of the funding, estimates range from $10 billion to $20 billion. Argentina and the IMF are currently negotiating the program’s details, with reports indicating that negotiations are progressing positively.
As the IMF’s largest debtor, Argentina has engaged in 22 programs with the organization, including a current $44 billion program still under repayment. The new decree indicates that net reserves were reported at negative $11.2 billion in December 2023, improving by approximately $7 billion but still remaining around $4 billion in deficit. Securing new IMF funding could improve these reserves and may lead to the withdrawal of capital controls that have been in effect since 2019.
This directive deviates from the traditional legislative process, as new IMF programs usually require congressional approval through a formal bill. By utilizing a decree, the Milei administration can more efficiently obtain approval from one legislative chamber, facilitating a timely resolution.
Argentina is actively pursuing a new IMF agreement to stabilize its economy under President Javier Milei’s leadership. The issued decree expedites the process, enabling quicker access to funds that would alleviate debt challenges and capital controls. With negotiations currently underway, the urgency of the situation underscores Argentina’s need for financial support to bolster its reserves and enhance economic stability.
Original Source: www.usnews.com
