Argentina’s government has enacted a decree supporting a new IMF program, aimed at addressing debt and capital control issues. President Milei’s strategy involves leveraging a decree for quicker legislative approval, as his party lacks a majority. The proposed program includes a repayment period of ten years with a grace period, and analysts estimate funding between $10-20 billion is needed.
Argentina’s government has issued a decree backing a new International Monetary Fund (IMF) program, marking a significant move towards finalizing a deal aimed at addressing the country’s debt crisis and easing capital controls. This decree, classified as necessity and urgency (DNU), is part of President Javier Milei’s broader strategy to navigate Congress, where his party holds a minority of seats and depends on conservative allies for support.
Facing multiple economic challenges, including restoring stability under austerity measures and managing looming debt repayments, Milei’s administration seeks additional funding as central bank reserves remain critically low. The decree proposes an extended fund facility (EFF) with a repayment duration of ten years, including a grace period of four and a half years, although specific dollar amounts for the program have yet to be disclosed.
Estimates suggest the potential new program could range between $10-20 billion, with ongoing negotiations between Argentina and the IMF indicating “good progress” toward finalizing details. Historically, Argentina has a complex relationship with the IMF, having engaged in 22 programs, including a previous $44 billion arrangement.
The decree also highlights improvements in net reserves, which had dropped to negative $11.2 billion in December 2023 but have since recovered by approximately $7 billion. New IMF funding could assist in further stabilizing these reserves and might facilitate the removal of long-standing capital controls imposed since 2019, which have distorted trade activities. The use of a decree rather than a traditional bill streamlines the approval process as it requires merely the support of one legislative chamber, expediting the adoption of this vital program.
The issuance of the decree by Argentina’s government signifies a strategic push to secure a new IMF program that could provide vital support for its economy. By aiming for a swift legislative approval through a decree, President Milei’s administration is working to mitigate capital constraints and improve economic stability, despite facing historical challenges with the IMF. Estimates suggest that the new funding might be crucial for alleviating the country’s debt situation and enhancing central bank reserves.
Original Source: gazette.com
