The agency reiterated that it is “essential” to achieve the agreed primary fiscal deficit of 1.9% of GDP, an objective that is difficult to achieve due to the drop in export duties caused by the drought.
The International Monetary Fund (IMF) warns that the Argentine economy is going through a situation that “It has become increasingly fragile.” and projects inflation of 120% for the year and a fall of 2.5% of the GDP, according to the technical report of the agency given at 6:00 p.m. on Friday.
He staff report The 116-page document also indicates that the historic drought caused higher-than-expected losses in agricultural production, exports, and fiscal revenue, although the rest of activity was resilient “reflecting robust domestic demand partly as a result of policy slippages.” ”.
As stated in the press release, it reiterates that it is “essential” to achieve the agreed primary fiscal deficit of 1.9% of GDP, an objective that is difficult to achieve due to the fall in export duties caused by the drought. The imbalance currently stands at 2.7% of GDP, according to calculations by the ACM consultancy.
The owner of the Fund specified that the government should focus “efforts” on:
- reinforce spending controls with initial measures aimed at updating energy rates
- contain public salaries and pensions, while protecting priority spending on social programs and infrastructure.
In addition, he considered that these measures are being complemented with temporary increases in taxes on imports to compensate for the loss of income.
markets
Regarding the future of exchange rate policy, the head of the IMF said that:
- The exchange rate adjustment rate will be carefully calibrated to facilitate compliance with the reserve accumulation and inflation reduction objectives,
- Real interest rates will remain at duly positive levels to continue supporting the demand for assets in pesos.
- Financial and futures market interventions will also be limited and temporary, and will focus on correcting disorderly conditions.
- Multiple exchange rate practices, exchange restrictions, and capital flow management measures will be phased out as conditions permit, as they are not a substitute for sound macroeconomic policy.
Fiscal policy
The Argentine authorities and the staff of the Fund agreed that in subsequent years “fiscal consolidation will be accelerated with high-quality measures focused on spending and revenue.”
As usual, he reiterates that it is “need to continue paying attention to protecting the poor and promoting inclusive growth as imbalances are corrected.”
Finally, it warns that “it continues to be crucial to have broad political support and that the program is assumed as its own in the short and medium term, since to solve the profound challenges that Argentina is facing will require the efforts of future governments” .
Source: Ambito
