IMF urges Argentina to adjust spending by 11% to meet budget target
The International Monetary Fund (IMF) has outlined new targets for Argentina’s international reserves and public spending as part of the fifth and sixth reviews of the Extended Fund Facility (EFF) program.
The IMF foresees a 2.5% economic decline and 120% inflation for Argentina by the end of 2023, attributing these figures to a severe drought and policy delays.
Following a recent US$7.5 billion disbursement to Argentina, the IMF indicated that the 2023 fiscal target will remain at 1.9% of GDP.
This involves strengthening expenditure controls, updating energy tariffs, containing public wages and pensions, and protecting priority spending on social programs and infrastructure.
To offset drought-related export revenue losses, temporary foreign exchange tax increases on selected goods and services will be implemented.
The IMF urged Argentina to adjust spending by 11% from August to December to achieve the year-end fiscal target.
It also projected that with the new policy package, Argentina could accumulate $8 billion in international reserves by year-end.
The Central Bank of Argentina (BCRA) recently devalued the peso by 22% and raised the monetary policy rate to 118%.
In response, the International Monetary Fund (IMF) noted that these adjustments and a more stringent monetary policy should aid in accumulating reserves while curbing the impact on inflation.
The IMF emphasized the importance of maintaining positive real official rates to support peso demand and address high inflation and highlighted the role of monetary policy as a key instrument to contain market pressures.
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