Argentina’s lower house of Congress approved President Milei’s request for a new loan agreement with the IMF to strengthen the Central Bank’s reserves and manage debt payments. This follows a previous US$44 billion loan from 2018. As protests against his austerity measures grow, negotiations with the IMF continue, aiming to reform currency policies and address inflation issues.
On Wednesday, Argentina’s lower house of Congress approved President Javier Milei’s request for a new loan agreement with the International Monetary Fund (IMF). This loan aims to bolster the Central Bank’s foreign currency reserves and address upcoming debt payments, building on the previous US$44 billion borrowed in 2018 under former President Mauricio Macri’s administration. The terms of the prospective loan, including the exact amount, remain undisclosed but will feature a grace period of four-and-a-half years for repayments.
Negotiations with the IMF are ongoing, and significant details have not yet been revealed. The anticipated changes in currency policy associated with the new loan have intensified recently, causing the peso to decline to its lowest value in over five months on the parallel market. In an attempt to alleviate market concerns, Economy Minister Luis Caputo provided an interview to local media but refrained from discussing potential policy changes.
Under a 2021 law, authorization from both legislative chambers is required for the president to finalize agreements with the IMF. However, an emergency executive decree necessitates approval from only one chamber. The lower house voted with 129 in favor, 108 against, and six abstentions, granting Milei the authority to finalize the agreement despite his ruling party’s minority status in Congress, thanks to alliances with several other parties.
President Milei celebrated the successful vote on social media with his signature phrase, “Viva la libertad carajo!” He further expressed that the legislative support conveys a “message of maturity and greatness.” Protests erupted outside Congress simultaneously, as thousands demonstrated against Milei’s austerity measures and negotiations with the IMF. Protesters, including retirees affected by pension cuts, argued that agreements with the IMF worsen their conditions.
Milei has implemented significant cuts in state spending since assuming the presidency, attributing the need for a new loan to the necessity of repaying debts to the Central Bank, which he argues will help to “exterminate” the persistent inflation issue facing Argentina. The country has one of the highest inflation rates globally, though since December, inflation has dropped from 211 percent to approximately 66 percent annually. The government has sought new funding from the IMF to enhance reserves and stabilize the economy, having recently sold significant sums of dollars from Central Bank reserves to support the peso.
The agreement with the IMF is predicted to support a stabilization plan that may reduce exchange restrictions and address inflation, while opposition officials voiced skepticism regarding the effectiveness of the loan and possible outcomes.
In summary, President Javier Milei’s administration has received Congressional approval for a new loan agreement with the IMF to improve Argentina’s economic position. This initiative aims to bolster the Central Bank’s reserves and manage impending debts amidst protests against austerity measures. While negotiations are still in progress, the administration contends that the agreement will contribute to addressing inflation and stabilizing the economy. However, concerns remain regarding the impact on citizens and the effectiveness of such loans.
Original Source: www.batimes.com.ar
