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An internal International Monetary Fund evaluation found that the IMF's 2018 arrangement with Argentina for $57bn complied with relevant policies and procedures, but was “too fragile” to deal with Argentina’s structural challenges and political realities.
The IMF also had accepted Argentina’s “preferred macroeconomic projections, which proved too optimistic”.
The ex-post evaluation, required for all IMF programs that exceed normal size limits, which are typically pegged to each country’s quota, found that weak public finances with rigid budgets, high dollarisation, a small domestic financial sector, and a narrow export base limited Argentina’s short-term economic policy options.
“The programme’s strategy proved too fragile for the deep-seated structural challenges and the political realities of Argentina,” the report said.
Argentina and the IMF have been discussing for over a year a new programme to refinance the $45bn the country still owes, including $19bn in payments due next year. Argentina was due to make a $1.9bn payment on Wednesday.
Among the lessons learned, the IMF found that the 2018 agreement “was marked by a degree of IMF deference to the Argentinian authorities’ policies and reluctance to question assumptions and policy choices.”
The government has also sought deference as part of the current negotiations, floating a longer-than-usual timeline for repayments as well as to avoid any payments through 2024.
The IMF was publicly supportive of the administration as it restructured $65bn in debt with international creditors, which said recently that they expect the IMF to rein in Argentina’s monetising of the deficit, among other hard requests.
The administration of President Alberto Fernandez refers to the IMF debt as debt taken by the prior government of Mauricio Macri, now in the opposition.
“It was an absurd loan,” economy minister Martin Guzman said in a televised interview on Wednesday after the IMF evaluation was public. He said the IMF was lacking in self-criticism.
Speaking of the failed programme, the evaluation found that “truly restoring confidence would have required not only improving public finances, expanding the export base, and addressing other structural challenges, but also showing that the reforms to these ends would be durable — a complex challenge given Argentina’s history and political economy.”
Argentina’s economy is only now pulling out of a recession that started in 2018, but the country continues to grapple with inflation running at more than 50% a year and a near 100% differential between the official exchange rate and the Blue Chip Swap rate.
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.