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IMF's Argentina predicament


Power Poster III
Major Contributor
  • Incoming government will need new IMF loan, analysts say
  • Current $44 billion programme refinances failed 2018 loan
  • Some at IMF complain of Argentina's preferential treatment
Just five years ago, Argentina became the Washington-based global lender's biggest single debtor, receiving a $57 billion bailout to help then-President Mauricio Macri's market-friendly government steer out of an economic crisis marked by high inflation and a gaping budget deficit. But that programme failed to put South America's second-largest economy back on its feet.

Fast forward and Argentina is about to enter a recession, with inflation running at more than 100% and its dollar reserves deep in the red. Meanwhile, the Peronist-led government that took over in late 2019 has missed the modest economic targets mandated by a 2022 IMF loan tailored to refinance $44 billion still owed from the previous programme.

Javier Milei, a far-right outsider who vaulted into the front-runner's position after primary elections last month, wants to dollarise the economy and said the Fund should encourage Argentina to more quickly reduce its primary fiscal deficit, which is targeted at 1.9% of gross domestic product for 2023.

The rise of leftist Nestor Kirchner to the presidency in 2003 opened a new chapter, as his government took a hostile view of the IMF and repaid some $10 billion owed to the Fund before cutting ties.

Following 15 years with no programmes, Argentina returned to the IMF in 2018 to request a record bailout. That effort paved the way for the $57 billion programme, which ultimately failed and was replaced by the current one.

"The shadow of that failed programme will linger on both the new administration and the IMF, as there is an institutional memory on how this programme didn't help", said Stephen Nelson, an associate professor of political science at Northwestern University in Chicago.

Four out of 10 Argentines live below the poverty line.