The International Monetary Fund has accepted to loan Argentina up to $50bn in the country’s quest to strengthen its already struggling economy. However, the three- year agreement is yet to get approved by the IMF Board. Argentina has experienced a series of economic challenges over the years and therefore had to seek assistance from the IMF on 8th May when her currency hit an all-time low. Nevertheless, the country has vowed to handle the double-digit inflation as well as public spending which are part of the agreement.
Argentine authorities assert that they aim to draw on the introductory trance of the agreement but treat the loan as a precautionary ultimately. Interestingly, the decision by Argentine President Mauricio Macri to seek help from the IMF had been criticized by many in his country.
The IMF is disliked and has been blamed for Argentina’s economic collapse in 2001 after it failed to provide financial support to the country. Mr. Macri has however asserted that the fresh loan from the institution would enable the government to strengthen its growth and development programs and provide support for facing the new global environment as well as avoiding a crisis similar to the ones faced by the country’s history. IMF managing director – Christine Lagarde has congratulated the authorities in Argentina for reaching the agreement.
Ms. Lagarde adds that the loan is a plan owned and designed by the Argentine government and its aim to strengthen the economy for the overall benefit of all Argentines. She is also glad that the IMF can contribute to the country’s strengthening efforts by providing the much needed financial support which will enhance confidence in the market and give authorities time to handle any vulnerability.
Some analysts such as Daniel Gallas, the BBC South America business correspondent argue that the IMF and Argentina are on opposite sides of the talks but they both want the same thing. Thus, Mauricio Macri and Christine Lagarde intend to minimize public spending in a bid to bring down the inflation which is the highest amongst the G20 economies.
The $50bn loan will enable Argentina to progress faster with its reforms. It will also minimize the fiscal deficit to zero by the year 2020 which is one year earlier than earlier promised. The IMF also recognizes its tainted reputation in a country that still blames the institution for its economic woes. As such, the IMF has included a clause in the agreement to enable the government to spend more funds on social programs when necessary. The IMF board will vote soon in Washington.