According to the International Monetary Fund, Argentina and the International Monetary Fund are “fully committed” in working together towards a new program. This was confirmed by the lender on Friday.
Argentina is fast moving to reach a deal with the IMF in order to pay back $45 billion of unpaid debts. This comes after years of currency and debt crises. The deal was discussed by a team that met recently with staff from the IMF.
The IMF stated in a statement that there was consensus on the need for gradual and sustained improvement of public finances. It also recommended that targeted social spending be allowed.
It stated that Argentina required a multi-pronged approach to combat rampant inflation. This would include reducing monetary financing, positive real interest rates, wage-price coordination, and reducing the fiscal deficit.
It said that although further discussions are necessary, the IMF team as well as the Argentine authorities remain committed to their collective efforts on a framework for a program IMF-supported.
Although the talks have been ongoing for more than a year, there has been renewed optimism about reaching a settlement and an agreement on a medium-term plan of economic development, which is crucial to restoring South America’s credibility in the markets.
Gabriela Cerruti (Argentine presidential spokeswoman) stated that the IMF statement was a sign that talks are moving in the right direction.
She said to reporters, “It’s very positive, very good,”
“We are following the same path. They acknowledge the progress in Argentina’s economic reactivation and the current fiscal improvement.
According to the IMF, “broad support” would be crucial for the success of the deal in both domestic and international. It added both sides had acknowledged the stronger-than-expected rebound in economic activity and investment this year.
Marko Papic (chief strategist at Clocktower Group), stated that he believes that this statement is something the government can sell domestically as an important win, and that austerity would not be easy to impose.
He said that some of the standards previously set for emerging markets will be lost.
It’s not as if money will just fall from the tree. Argentina and other countries will need to adhere to some conditionality. Investors must expect conditionality to be easier than before.