IMF vows 'full sup­port' for Ar­gentina amid eco­nomic cri­sis

A day af­ter anti-aus­ter­ity protests, IMF says it will work with Ar­gentina on 're­vised plan' to help its ail­ing econ­omy.

Zambian Business Times - - FISCAL AND DEBT MANAGEMENT -

The In­ter­na­tional Mon­e­tary Fund (IMF) has pledged its "full sup­port" for Ar­gentina as the coun­try seeks to over­come an on­go­ing eco­nomic cri­sis that has prompted a world-record in­ter­est rate hike and seen the value of the peso plunge to a record low against the dol­lar.

An IMF del­e­ga­tion will meet with Ar­gen­tine of­fi­cials on Tues­day to agree on a "re­vised eco­nomic plan" fol­low­ing Pres­i­dent Mauri­cio Macri's re­quest this week for an early re­lease of funds from a $50bn bailout pack­age agreed to in June.

"We are con­fi­dent that the strong com­mit­ment and de­ter­mi­na­tion of the Ar­gen­tine au­thor­i­ties will help the coun­try over­come the cur­rent dif­fi­cul­ties," Gerry Rice, the IMF's chief spokesper­son, said in a state­ment on Fri­day.

His com­ments came a day af­ter stu­dents and uni­ver­sity pro­fes­sors ral­lied in the cap­i­tal, Buenos Aires, to protest against aus­ter­ity mea­sures - in­clud­ing ed­u­ca­tion bud­get cuts - tied to the IMF pack­age.

Many Ar­gen­tines are wary of the body af­ter its per­ceived role in the coun­try's worst ever fi­nan­cial cri­sis, dur­ing 2001-2002, which left one out of ev­ery five people un­em­ployed and thrust mil­lions into poverty. In May, a sur­vey of more than 1,000 people by Ar­gen­tine poll­sters D'Alessio Irol/Beren­sztein re­vealed that 75 per­cent of re­spon­dents felt seek­ing as­sis­tance from the Wash­ing­ton, DC-based IMF was prob­lem­atic.

On Fri­day morn­ing, the peso ral­lied slightly af­ter a dis­as­trous Thurs­day which saw it drop by 13.5 per­cent against the dol­lar by the time mar­kets closed, mark­ing a 53 per­cent loss in value since the begin­ning of the year.

In a bid to ar­rest the de­cline, Ar­gentina's Cen­tral Bank has raised the coun­try's in­ter­est rate from 45 to 60 per­cent - the world's high­est.

The govern­ment is ex­pected to an­nounce fur­ther eco­nomic mea­sures at the begin­ning of next week.

'Po­lit­i­cal blow­back'

The eco­nomic cri­sis, which wors­ened af­ter Macri said on Wed­nes­day he had reached a deal with the IMF for ac­cel­er­ated pay­outs, has spooked in­vestors and prompted pub­lic protests.

The Gen­eral Con­fed­er­a­tion of Labour, the coun­try's largest labour union, has called for gen­eral strikes in late Septem­ber over the govern­ment's eco­nomic poli­cies.

Ar­gentina econ­omy: Protest over un­pop­u­lar IMF loan

Ar­gentina has agreed with the IMF to cut its fis­cal deficit to 1.3 per­cent of gross do­mes­tic prod­uct by 2019, down from 3.9 per­cent last year, re­sult­ing in cut­backs in­clud­ing slashed en­ergy sub­si­dies and the freez­ing of some govern­ment salaries.

Fiona Mackie, the Econ­o­mist In­tel­li­gence Unit's re­gional di­rec­tor for Latin Amer­ica and the Caribbean, warned the coun­try's at­tempt at a "rapid" eco­nomic ad­just­ment could prove "painful".

"Re­ces­sion could be deep, and po­lit­i­cal risk will spike amid dwin­dling con­fi­dence at home," she said in a Twit­ter post on Thurs­day.

The eco­nomic prob­lems and Macri's align­ment with the IMF have cast doubt over his chances of re-elec­tion in next year's polls.

Mon­ica de Bolle, a se­nior fel­low at the US-based Peter­son In­sti­tute for In­ter­na­tional Eco­nom­ics, ques­tioned on Thurs­day whether there will be a "big po­lit­i­cal blow­back" dur­ing the vote with "risks on the rise" ahead of the bal­lot in Oc­to­ber 2019.

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