The International Monetary Fund (IMF) approved $4.7 billion to support Argentine President Javier Milei's planned reforms but cited risks for the country's $44 billion loan program remain.
The financial agency said that the South American country is committed to accumulating international reserves and stemming a central bank financing of government debt under the latest review of its $44 billion loan program.
IMF Approves $4.7 Billion Fund for Argentina
The IMF also called Milei's stabilization plan for his country's embattled economy "bold" and "far more ambitious" compared to the ones that were put forth by his predecessors. The agency cited the reform mandate of Milei's landslide election victory late last year as a positive given the challenges of its implementation.
In a staff report on Argentina that was published on Thursday, the IMF said that authorities' strong ownership and electoral mandate to eliminate fiscal deficits and long-standing impediments to growth mitigate implementation risks.
Despite the praises, the financial agency acknowledged that risks to the program's success are still high, given the "very difficult" inheritance" from failed policies as well as a "complex political and social backdrop, with a fragmented Congress, falling real wages, and high poverty," as per Reuters.
The IMF noted that Argentina is also committed "in the near term" to eliminating "distortive exchange restrictions and multiple currency practices" as well as banning central bank credit to the government.
On Thursday, IMF Managing Director Kristalina Georgieva said separately that Argentina and the financial agency are currently not discussing a new program. She added that the country's government was correct in deciding to bring the existing program back on track.
President Milei, a right-wing libertarian, is currently facing a major challenge to push an omnibus reform bill through Congress. Furthermore, the effort must be done as his coalition only has a minority in both chambers.
The financial agency's announcement came on the same day that the South American country's lower house of Congress started what is expected to be a marathon debate on Milei's reform bill, according to DW News.
Javier Milei's Planned Economic Reforms
The Argentine president began his term by devaluing the peso by more than 50%, cutting government subsidies for fuel and transportation, halving the number of government ministries, and eliminating hundreds of rules in an effort to deregulate the economy. However, Milei's austerity measures prompted backlash and widespread protests.
On top of the approval of the $4.7 billion fund, the IMF also approved an extension of the program through Dec. 31, 2024. The agency added that this comes along with some rephrasing of planned disbursements within the existing envelope of the program.
Earlier this week, the financial agency also lowered its forecast for the South American country's 2024 GDP to a 2.8% contraction from a previous view of a 2.8% expansion. The decision was made primarily due to the expected effects of the new Argentine government's proposed reforms.
The fund also said that the approval on Wednesday brings disbursements within the $44 billion program to $40.6 billion. It noted that following a recent devaluation and "exchange rate realignment," the new policies should continue to secure reserve accumulation goals, said France24.
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