The International Monetary Fund (IMF) has agreed to disburse $4.7 billion to Argentina as the country's president, Javier Milei, continues to pursue his ambitious reforms.
The development also comes as the South American nation has failed to meet the terms of its $43 billion loan in the past few months. The money that the IMF has agreed to release offers a crucial lifeline for the libertarian official amid his efforts.
Argentina Agrees on Deal With IMF
The IMF's funding includes a $3.3 billion tranche of the loan that had been due to be disbursed in November last year. The money for that was delayed by Milei's inauguration in December. The money would also include $1.4 billion that the IMF agreed to disburse ahead of schedule.
The South American country's hard currency reserves have virtually been wiped out amid what experts consider its most severe economic crisis in the last two decades. The Argentine government is now relying on the IMF's disbursements to pay the fund back for money that was previously lent earlier in the program, as per the Financial Times.
The program was first launched in 2018 and it was refinanced in 2022, with repayments worth more than $2.7 billion coming due by Feb. 1, 2024. Entering into arrears would destabilize markets and deepen the economic crisis in Argentina.
The Wednesday decision of the IMF's technical staff is required to be reviewed by its board, which is a process that will take several weeks. The Argentine president has long pledged that his austerity measures would be more drastic than those that the IMF demanded.
Milei has sought to draw a contrast with the previous left-leaning Peronist government, which fell short of fund targets on fiscal balance, reserve accumulation, and curbing money printing. The president's "shock therapy" economic plan was implemented last month and includes spending cuts and tax increases.
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Javier Milei's Ambitious Reforms
In a statement, the IMF said that they reached understandings on a strengthened set of policies to restore macroeconomic stability to Argentina and bring the current program back on track. The South American nation's inflation is approaching 200% and net foreign currency reserves are in the negative, according to Reuters.
Argentina's new government under Milei had been locked in discussions with IMF officials in Buenos Aires since late last week. After the announcement of the deal, Argentine Economy Minister Luis Caputo said that the agreement did not represent a new deal.
The situation comes as Milei is facing opposition to his ambitious reforms after a court suspended his "mega-decree" labor law reforms earlier this month. Judges suspended the changes to the labor law that formed part of the president's plans.
The CGT trade union body has also challenged the changes, which technically took effect late last year, on grounds that they erode basic worker protections such as the right to strike and parental leave.
The judges of the court froze elements of the president's decree, which also increased the legal job probation period from three to eight months, reduced compensation in case of dismissal, and cut pregnancy leave, among others, said France24.
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