The Government of Javier Milei faces one of the most transcendental negotiations of its management: the possibility of obtaining a new agreement with the International Monetary Fund (IMF) that includes a loan with fresh money for more than 10,000 million dollars. However, The recent visit of the IMF mission to Buenos Aires concluded without an agreement, which suggests that there are significant differences on key aspects of Argentine economic policy.
Challenges in exchange and monetary policy
One of the main discussion points is exchange and monetary policy. According to analysts and former FMI officials, The international financial body considers the elimination of “exchange rate” and greater exchange flexibility as a condition for a significant disbursement of funds. This would imply one weight devaluation and the end of the current scheme of gradual adjustments of the exchange rateto avoid greater exchange delay, which could generate volatility in the market but also allow the accumulation of international reserves.
The IMF also seems to be evaluating the sustainability of Milei’s economic policies in the long term. While the measures of Fiscal adjustment have managed to eliminate the Fiscal deficitdecelerate the inflationary rhythm and reduce the exchange gap, the body seeks to ensure that Argentina has a credible monetary and exchange regime to avoid future imbalances. To this is added the concern that the elimination of the stocks and a free flotation of the exchange rate could lead to a massive capital exit, further weakening the position of the central bank.
From the perspective of the IMF, the Argentine economy faces a structural problem of exchange delay. Despite the elimination of the fiscal deficit, of the implemented deregulation process and the subsidies adjustments, the agency considers that the speed with which these reforms will impact on the trade balance will be less than the rhythm of deterioration that the current account could experience a time the economy begins to recover.
The role of the United States in negotiations
In this context, The role of the United States in negotiations acquires special relevance. As the main shareholder of the IMF, the US government could influence the decision of the agency, especially considering Milei’s ideological alignment with the administration of Donald Trump. However, experts warn that this influence is not absolute: the IMF operates with technical criteria and does not usually approve loans that it considers economically unfeasible. Despite the political support that Washington could offer, the IMF remains tied to its regulatory framework and the rigorous evaluations of its technical staff.
A critical point is the possible pressure of Trump’s government over the IMF. Although it could seek to make certain conditions more flexible in favor of Argentina, the agency maintains caution, remembering the controversial loan granted in 2018. The US administration could press to expand the disbursement of resources, but it could hardly force the IMF to ignore its own guidelines.
Legal issues and lack of political consensus
Another determining factor is the Argentine legal framework. The Constitution establishes that Congress must approve external debt taking, and a recent law reinforces this principle. This raises questions about whether a loan of such magnitude could be realized without legislative support, which could increase political uncertainty in the country.
The lack of a budget approved by Congress also generates concern in the IMF. For two years, Argentina operates without a sanctioned budget, reflecting the difficulty of the government to build consensus in Parliament. Although the law allows the extension of the previous budget, the lack of legislative support is perceived as a sign of political instability and could weaken Argentina’s position in negotiations.
According to experts, the IMF could condition any additional loan to the guarantee of political stability and legislative commitment. A divided Congress could become an obstacle to the effective implementation of any agreement.
A possible agreement in two stages
Faced with these challenges, some analysts suggest a two-stage approach: first, a stand-by program that covers debt maturities with the IMF in 2024 without requiring drastic changes in economic policy; Then, after the mid -term elections, a broader negotiation that includes structural reforms within a monetary and exchange program that allows to accumulate international reserves, with a more adjusted real exchange rate and positive real rates.
This approach would allow Argentina to win time to stabilize the economy and consolidate its reserves before implementing deeper changes. In addition, it could give margin to the Government of Milei to build a greater political consensus in Congress, which would be key to achieving a legislative approval of the agreement.
Conclusion
The future of the Argentine economy depends on the government’s ability to articulate an economic plan that balances the demands of the IMF with the need for social and political stability.
In order for the agreement to prosper, Argentina must demonstrate commitment to credible structural reforms that guarantee the accumulation of reserves and a sustainable exchange regime. Without legislative support or clear signals of political consensus, the IMF could limit any financial assistance to a simple debt refinancing instead of a new net capital flow.
The key is that Argentina achieves a combination of fiscal adjustment, exchange flexibility and solid legislative support. Without these conditions, any agreement with the IMF runs the risk of being a temporary relief instead of a lasting solution for the country’s economy.
Source: Ambito
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