A technical mission of the International Monetary Fund (IMF) approved the third review of its agreement with Argentina, which will now be reviewed by the board of directors, but called for greater fiscal adjustment to balance the primary budget, the organization said on Monday (8.3.2018).
The eventual confirmation of the Fund's directors, at a meeting expected in the coming weeks, will allow the transfer of a tranche of US$10.870 billion from the agreement signed by President Mauricio Macri's government with the global lender for some US$56.000 billion last year, he added.
“The high fiscal and external deficits (…) are in the midst of a significant correction,” The Washington-based agency said in a statement. “Economic activity has been weak, but there are good prospects for a gradual recovery.”
Argentina has been carrying out an austerity plan since last year to meet IMF requirements and restore its image among investors after a crisis of confidence that caused the value of the currency to collapse, fueled inflation and plunged the country into recession.
“Achieving a zero primary deficit in 2019 will require further restraint on government spending”, the IMF added in the statement.
The approval of the revision was already practically discounted by the markets given the improvement in public accounts in recent months and the tightening of the Central Bank's monetary policy in the fight against inflation.
The Fund praised the strengthening of the monetary plan announced last week by the central bank and, in addition, specified that this organization will buy dollars from auctions that the Treasury plans to hold, if the exchange rate of the currency appreciates beyond the threshold of the current exchange rate scheme.
“Weak economic activity and high inflation are having an impact”, the statement said. “In this context, we strongly support the authorities’ efforts to mitigate the social impact of the necessary stabilization policies.”
Source: Reuters
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