Alejandro Werner, former director of the Department of the Western Hemisphere of the International Monetary Fundhe raised Three possible scenarios in negotiations towards a new agreement with Argentina. In addition, the former official said that this year the government faces Two crucial challenges that will determine the sustainability of their stabilization program.
For this expert, “mid -term legislative elections in October will be proof of their political strength. The first challenge is to ensure good performance in these elections. With the renewal of half of the Chamber of Deputies and one third of the Senate, the scenario is decisive. Currently, Libertad progresses, Milei’s party has minimal representation in Congress. “
The other challenge has to do with the appreciation of weight. “In 2024, inflation was 117%, but the weight depreciated less than 30%, being at one of its highest levels in decades. This assessment represents a significant risk for the stabilization program based on the exchange rate, especially considering the negative net reserves of the Central Bank and the slow accumulation of international reserves, “he warned.
He also stressed that Without enough reserves, the weight cannot float freely or the stocks can be eliminated. However, “adjusting the exchange rate could generate a temporary rebound in inflation and loss of purchasing power, which would put Milei’s electoral perspectives at risk,” he revealed.
“Milei decided to retain this last agreement, considering that its policies would exceed the program goals. However, Argentina now needs a third program with the IMFnot only to refinance debt services with the fund in the coming years, but also to access new resources that strengthen their reservations, “Werner said.
The three paths that according to this former IMF official can be given
In scenario 1: Argentina could avoid politically expensive IMF in exchange rate and interest rates, Find expensive financing in international markets and bring net international reserves to an even more negative territory to cover their external needs of 2025postponing an integral agreement with the IMF until after the elections
Scenario 2: The IMF accepts the Argentine argument of the excessive appreciation of the weight and Sign a new program with important initial resources and cosmetic changes in current policies. Argentine optimism regarding its ability to influence these negotiations and, therefore, to the possibility that this scenario materializes, has increased from the choice of Donald Trump And the good relationship that both presidents seem to have.
Scenario 3: With a stepped approach, The IMF could provide short-term support to cover Argentina’s obligations with the Fund in 2025 through a one-year Stand-by (SBA) agreementwhich would also allow other international financial institutions to refinance the debt service of Argentina. After the elections, it would follow a more robust program, probably an extended facilities agreement (EFF).
The latter, according to Werner, would probably include greater financial support, with positive net disbursements by the IMF for 2026, conditioned on The correction of the overvaluation of the exchange rate and the acceleration of the dismantling of the exchange controls. This strategy would relieve immediate financial pressures while postural IMF support is postponed until Argentina resolves its political and economic uncertainties.
“Not signing a new agreement would place Argentina in a very delicate financial situation, since the service of its debt with the IMF and other international financial institutions (IFI) in 2025 amounts to about US $ 8,000 million, a sum that Market participants would probably not be willing to lend Argentina to pay these organizations, “he said.
Source: Ambito

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