The deputy managing director of the International Monetary Fund (IMF), Gita Gopinath, said on Wednesday that the “severe drought” that Argentina has gone through has had a “very important impact on the economy”, a situation which explains the decision of the organization to “compensate it in terms of reserve target” in the latest revision of program targets that is made.
In an interview with the Spanish newspaper El País, Gopinath also highlighted the “prudent macroeconomic management” that the Argentine economy ministry is carrying out and which originally contributed to the drop in inflation levels.
In this sense, the economist specified that the measures must be supported. “To make sure it’s going in the right direction, to make sure the parallel market exchange rate isn’t too far off the official exchange rate. All of this requires trust that there will be sufficient reserves and that fiscal policy will remain consistent with the reduction of inflation, which calls for strong expenditure-side measures to contain fiscal spending“.
“If I look at the changes over time, I would say that in the second half of the year, thanks to prudent macroeconomic management, we started to see inflation come down,” the official recalled.
“But then – he acknowledged -, at the beginning of the year, the country is hit by a severe drought. This is a fundamental change, a great shock for the system. At the same time, there have been setbacks in policies”.
In this sense, Gopinath stressed that in the latest revision of the objectives of the agreement with the IMF it was recognized that “due to the drought, there should be some compensation in terms of the reserve target because this is a very important target impact for the economy”.
“Taking into account that the economic situation is very fragile in Argentina, the program should serve as an anchor to reduce inflation, albeit at a slow pace,” he said.
?The situation in which the country finds itself is very difficult. There is a shared understanding with the authorities that even more efforts are needed to have a good macro environment. To be able to have a consistent fiscal policy, monetary policy and exchange rate policy that can help reduce inflation and avoid major disruption in the domestic bond market, she said.
He concluded: ?We will continue to work closely with the authorities and see what is needed in terms of stronger policies to move towards greater macro stability.?
Source: Clarin
