The International Monetary Fund says its record US$56 billion program for Argentina failed to ‘improve confidence’ and was ‘fragile since its inception’ despite the size of the loan, and the management of flows of capital and a reprofiling of private debt could have been tackled in 2018.
The staff report released on Wednesday, known as the “ex post assessment” and led by IMF Deputy Managing Director Odd Per Brekk, is a key milestone in IMF procedures, which require staff review. a program with exceptional access.
“An early debt operation, combined with the reintroduction of capital flow management measures, could have provided a more robust program,” the report said. Although the assessment added that the need for a debt operation was unclear at the start of the program, it was later dismissed by Mauricio Macri’s administration.
Argentina’s three-year stand-by agreement, with total disbursements of up to $44 billion, represents more than 10 times the country’s allocation with the Fund. The administration of President Alberto Fernández is negotiating a new program with the IMF to reschedule payments due to the Washington-based multilateral lender.
Here are some key takeaways from the IMF report:
– “Greater burden sharing with other official creditors could have, in addition to providing additional financing, signaled broader support from the international community, which could have enhanced confidence”
– “Lack of ownership by all branches of government has been fatal to the program,” the report adds
– “The rapid depreciation of the exchange rate from mid-2018 made the targeted disinflation path unrealistic due to the high pass-through”
– Existing debt instruments were “very problematic”; Central Bank liabilities known as LEBAC ‘were not well understood at time of program request’
Views from Argentina:
– The stand-by deal was an “IMF-funded bailout to private creditors and investors who had speculated on carry opportunities”
– The real objective of the program was to maintain the government policies of 2018 “at all costs, with the financing of the IMF”
– Inflation should be considered as a multi-causal problem in future programs, and it cannot be solved by monetary policy alone
– The IMF must review the “political use” of its programs, reconsider the sense of ownership
– “The program did nothing for Argentina other than to massively worsen a balance of payments problem.”
by Jorgelina do Rosario, Bloomberg