IMF approved another disbursement and warned against inflation: "the results were disappointing" – 04/05/2019

The Executive Board of the International Monetary Fund on Friday approved a new disbursement of $ 10,800 million this will happen in the coming days at the Treasury, which will bring financial relief to the government. IMF says recession "seems to be over", but asks Mauricio Macri's administration "Prudence in the execution of expenses". He also warns against the policy to reduce inflation. "The results in terms of inflation have disappointed".

The green light arrived after the board At a meeting in Washington this afternoon, he will badyze the figures of the Argentine economy presented by the technician Roberto Cardarelli, head of the mission that was in our country in February.

The CEO of the Fund, Christine Lagarde, said that "the policies of the authorities that support the agreement supported by the IMF are bearing fruit." The high budget deficit and the current account – two major vulnerabilities that led to the financial crisis last year – are declining, economic activity has contracted in 2018, however, there are signs that the recession has bottomed out and a gradual recovery is expected in the coming quarters.. However, inflation remains high; Inflation expectations rise and inflationary inertia is difficult to break"

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Lagarde added: "The Argentine government has shown its determination to ensure that the public debt-to-GDP ratio is sustainable, thereby reducing the 2018 primary deficit below the target set by the program."

However, he warned: "However, given the lower than expected level of tax revenues in the first half, it will be essential to act on an ongoing basis. cautiously in the execution of spending plans and take other measures to increase tax revenues so that the fiscal situation of 2019 reaches the primary balance. There is a need to redouble efforts to improve the fiscal framework and debt management in the medium term. "

The Executive Board is made up of 24 representatives from all member countries (some directors represent a group of nations), but the voices of the most powerful economies, who provide the body with the most money, including the United States, weigh heavier. Japan, China, Germany, Canada, France, Great Britain, Italy. It was ruled out that the new disbursement should be approved.

The meeting was chaired by Lagarde. Administrators were able to ask technicians specific questions. With the disbursement approved today, the agency has already granted nearly 40,000 million dollars out of a total expected of 57,600. The IMF would give up to December, when the term of President Mauricio Macri will expire, 51,200 million.

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The money approved today will arrive in a few business days at the Treasury coffers. They will not arrive directly in our country, but through a system that is usual in these cases and that includes the bank movements in the Swiss city of Basel. To mobilize the loan, the agency typically uses the Bank for International Settlements (BIS), an international institution operating as a central bank of all IMF member countries. From there, he goes to Argentina. The process usually takes only a few business days, so between Tuesday and Wednesday, the money would reach the Treasury.

As the agribusinesses' dollars are left to wait, the government will have more relief to meet the expenses. He will also be able to pay $ 60 million a day, a measure recently approved by the agency, which will reduce the tension on exchange rates during an election period.

In his statement, Lagarde said that "after a few months of relative stability, financial volatility has rebounded in recent weeks as the global financial situation has become less favorable and the results in terms of inflation disappointing. BCRA responded to this situation by recalibrating monetary policy, maintain zero growth of the monetary base until the end of the year. A new central bank charter has been submitted to Congress which, if approved as law, will enhance the credibility of monetary policy. "

He also highlighted the social situation: "Protecting the most vulnerable from the impact of the recession and high inflation remains a key priority.The authorities have taken a series of measures to improve the coverage of the network. social protection and provide more resources to the poor, and continued efforts will be needed to fill the remaining gaps in the coverage of the social protection network and to improve the effectiveness of social programs to combat poverty. "

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He went on to say that "the favorable market conditions have allowed the government to fully refinance the debt that will expire over the next few months." The interest rate paid on this debt has decreased and the authorities are redoubling their debt. Efforts to lengthen the maturities of newly issued debt The authorities are also implementing policies to develop debt markets in national currency. "

He went on to discuss some priorities: "Supply reforms are essential for achieving strong, sustainable and equitable growth and for improving the standard of living of the people of Argentina." Priorities include additional efforts to create a less tax system. distorted, promote increased competition in domestic product markets, remove barriers to international trade and foreign investment, strengthen governance, fight corruption and promote gender equality. "

Finally, he said that "the success of the authorities' action plans depends on continued and resolute implementation." This will require broad support for policies that mitigate economic vulnerabilities, increase the potential for Argentina's growth and strengthen market confidence. "