Default – The IMF comes to Argentina’s aid, but points out the risks


After months of negotiations, the IMF has validated a new aid plan of almost 41 billion francs to Argentina, thus avoiding default.

Argentine Economy Minister Martin Guzman January 28, 2022 in Buenos Aires.


On Friday, the IMF approved a $ 44 billion (almost 41 billion francs) aid program for Argentina with an immediate disbursement of $ 9.65 billion, but it underscores the “unusually high risks” surrounding its implementation in the context of the war in Ukraine. .

This new deal, negotiated since August 2020, is a real lifeline for Buenos Aires. The previous government (center-right) had in 2018 entered into a record loan of $ 57 billion. But as it struggled to repay its maturities, the second-largest economy in South America risked default.

“This is an important step forward for Argentina in the process of macroeconomic stabilization, which will enable the country to continue to create the conditions for continuing the current strong economic recovery,” Argentine Economy Minister Martin Guzman told AFP in Paris.

“Greater stability”

For Martin Guzman, who met in France with the Paris Club and the International Energy Agency (IEA), debt refinancing in 2018 and 2019 will allow “greater stability” and will stimulate “investment growth” as well as “recovery of employment and production ”.

The new 30-month assistance plan, granted under the International Monetary Fund’s “extended credit facility”, was to enable Argentina to “strengthen debt sustainability, fight high inflation, increase reserves, fill the country’s social gaps”, the institution explained.

If the economic and employment recovery is on track after the crisis caused by the Covid-19 pandemic, “Argentina will continue to face extraordinary economic and social challenges,” stressed IMF Executive Director Kristalina Georgiava. And to quote “a pressure per capita income, high levels of poverty, persistently high inflation, a heavy debt burden and low external reserves”.


Even before the pandemic, the poverty rate was close to 36% according to IMF data. Kristalina Georgieva believes that the economic program, drawn up by the Argentine Government and supported by the Fund, “sets pragmatic and realistic goals as well as credible policies to strengthen macroeconomic stability”.

The program should thus make it possible to clean up the Argentine budget and support growth, which will make it possible to strengthen debt sustainability and control “persistent and high inflation”. However, the head of the IMF notes that “a strong political and social consensus is essential to support the implementation of the reform program”.

The Argentine Congress gave its approval last week to this loan amount. On the other hand, he did not vote on the macroeconomic policies themselves. Despite political frictions, an IMF official who requested anonymity said he was “completely confident” in the program. Kristalina Georgieva acknowledged that the risks were “unusually high”, as the fallout from the war in Ukraine is already materializing.

Program recalibration?

“The recent dramatic rise in geopolitical tensions increases uncertainty over the global outlook for growth, inflation, commodity prices and capital flows, with significant potential implications for Argentina and for the program,” IMF economists note in a report released Friday night.

They also note that a resumption of the pandemic is not ruled out, not to mention the tightening of global financial conditions and climate shocks. “Furthermore, the program may fail to build trust and build stability over time, especially if the political backing for the program diminishes, including ahead of the October 2023 presidential election,” officials warn. the authors of the report.

“In this context, early recalibration of the program, including the identification and adoption of appropriate measures, if necessary, will be crucial to achieving the objectives of the program,” Kristalina Georgieva said. The IMF official, who did not want to be identified, said an initial review of the program should take place as early as mid-May. However, he did not give a date on a possible mission to the country.


Leave a Comment