Argentina strikes $50 billion financing deal with International Monetary Fund

10 June, 2018, 21:26 | Author: Regina Silva
  • Argentine finance minister Nicolas Dujovne said the approved loan was 11 times IMF's quota. EPA  JAVIER CAAMANO

The deal still needs approval from the IMF's executive board, which will examine Argentina's economic plans in the coming days.

"In sum, I believe that Argentina's reforms deserve the support of the IMF and the worldwide community and I look forward to soon discussing Argentina's request for support with the IMF's Executive Board".

Argentina, which has been plagued by economic problems for years, asked for assistance from the International Monetary Fund on 8 May after its currency hit an all-time low.

Latin America's third-largest economy was hit hard as the BCRA hiked interest rates three times in a week from 28% to 40% in a bid to halt the fall in the Argentinian peso, which has depreciated 18% this year against the U.S. dollar.

Treasury minister Nicolas Dujovne said this was 11 times greater than Argentina's quota which reflected the support of the worldwide community for country. The turn to the lender by President Mauricio Macri has led to protests in the country.

Argentina will seek to reduce its fiscal deficit to 1.3 percent of gross domestic product in 2019, down from 2.2 percent previously, Dujovne said. It calls for fiscal balance in 2020 and a fiscal surplus of 0.5 percent of GDP in 2020.

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The deal brought back bad memories for Argentines who blame the IMF's policies for the country's worst economic crisis in 2001.

Central Bank President Federico Sturzenegger said the bank will still intervene in currency markets in times of "disruptive movement". A minimum $20 billion had been expected based on Argentina's quota. The central bank will not target inflation this year, he said. We are also encouraged by the authorities' commitment to ensure legal independence and operational autonomy for the central bank and to immediately put an end to central bank financing of the federal deficit. The previous targets were 2.2% and 3.2%, respectively.

South America's third-largest economy intends to use the loan, which still requires the International Monetary Fund executive board's approval, to try to balance the budget by 2020 and reduce inflation to single-digits by 2021.

Argentina's annual inflation target was 15 percent for 2018, but had reached nearly 10 percent by April, and forecasts suggest it will hit 27 percent.

"We believe that Argentina's economic and financial policies, including measures to enhance growth and protect the most vulnerable, warrant the strong backing of the global community", he said.

In a separate statement, the president's office said it had clinched agreements for an additional $5.65 billion from the Inter-American Development Bank, the World Bank and the CAF development bank over the next 12 months.

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