Buenos Aires (AFP) – Argentina has sought a $20 billion loan from the International Monetary Fund, the country’s economy minister said Thursday, as the government struggles to hold on to foreign reserves while propping up an ailing currency. In addition to the $20 billion IMF request, Luis Caputo said Argentina — the IMF’s biggest debtor by far — was negotiating an additional package with other organizations such as the World Bank and Inter-American Development Bank (IDB).
President Javier Milei’s government announced the preliminary figure amid a run on the peso, prompted by fears of a possible devaluation, that drained reserves by more than $1.2 billion last week. Milei said the loan would “in no way” involve a devaluation. “What is missing here are pesos, not dollars,” he told Radio El Observador. The proposal must be approved by the board of the IMF, whose spokeswoman Julie Kozack said Thursday that discussions with Argentina, including for a “sizable financing package,” were “very advanced.” She did not provide a figure for the size of the package.
Caputo said the IMF loan would “not be used to finance expenses” but to recapitalize the Argentine central bank. Argentina has been a serial defaulter in recent decades, and the IMF has bailed out South America’s second-largest economy 22 times in the past. Self-described “anarcho-capitalist” Milei came to office in December pledging to cut spending, tame inflation and fix a steep fiscal deficit. In the last six months, the peso has fallen about ten percent to the US dollar.
The new loan will add to the existing $44 billion Argentina already owes the IMF under a deal signed in 2018 for the bank’s biggest-ever loan. Argentina has one of the highest inflation rates in the world, but under Milei it has fallen from 211 percent year-on-year at the end of 2023 to 84.5 percent in January. The president has said a new IMF deal will help ensure that “inflation is only a bad memory.”
Keeping inflation at bay is Milei’s main political capital as the mid-term legislative campaign approaches with his party — lacking a majority in Congress — seeking to increase its seats. Kozack said Thursday that Argentina has “embarked on a truly impressive stabilization program” and “reforms are starting to bear fruit.” Caputo said the recent run on the peso was the result of “an attempt to destabilize the government of President Javier Milei,” which he blamed on “the opposition.”
The government has faced weekly protests by pensioners, recently also joined by football fans, unions, and social organizations, that this month erupted into violent clashes with police. The country’s main CGT union has called a general strike for April 10. In Argentina, there are five different exchange rates for the dollar, with a flourishing black market where the so-called ‘blue’ dollar was quoted Wednesday at over 1,300 pesos per greenback while the official rate stood at 1,091 pesos — the largest gap in more than six months. The government has made commitments to lifting foreign exchange controls in place since 2018, but the scarcity of foreign currency has not allowed it to do so.
© 2024 AFP
