The Minister of Economy, Luis Caputo, received today around noon the number 2 of the International Monetary Fund, Gita Gopinath, as part of her surprise visit to the country to monitor the progress of the adjustment plan after the failure of the omnibus law and review the reforms planned by Javier Milei’s government before the next program review in May.
Gopinath landed this morning in Buenos Aires accompanied by Luis Cubeddu, Deputy Director of the Western Hemisphere Department, Ashvin Ahuja, Head of the IMF Mission in Argentina, Ben Kelmanson, the organization’s Senior Resident Representative in Argentina and Matthew Jones, Senior Advisor to the first deputy director Fund manager.
“The First Deputy Managing Director of the IMF, Gita Gopinath, arrived in Buenos Aires today where she will meet President Milei, his economic team, academia, civil society, entrepreneurs and workers,” sources from the organization said. , meanwhile, have confirmed that the official will meet Milei tomorrow at Casa Rosada.
Caputo met at the Palacio de Hacienda from noon to afternoon with the economist’s team.
It wasn’t the first time they met face to face. Gopinath had met the minister and Javier Milei at the World Economic Forum in Davos in January.
The visit would aim to clarify the doubts that exist within the organization and on Wall Street about the political sustainability of the program approved three weeks ago. The organization’s latest staff report mentions the risks faced by the program, including the social situation.
The government made progress in a strong adjustment of fiscal accounts, which was reflected in the primary and financial surplus achieved in January, the largest in 12 years. Caputo, for his part, has celebrated in recent days the slowdown in inflation, the accumulation of reserves and the reduction of the exchange rate gap, while warning that the next few months will be “very tough”.
There is concern at the Fund about how the numbers will continue after January. After the fall of its first law in Congress, in January the Executive cut public spending by almost 40% on an annual basis through the postponement of the payment of subsidies to CAMMESA, the elimination of the fund for the payment of teachers (Fonid ) and a strong liquefaction of pension resources.
The organization knows that these spending measures will hardly be able to be sustained over time to guarantee a “zero deficit”. Not even the collection of taxes related to devaluation, with the official dollar rising by 2% monthly. Caputo tried to compensate for the delay in approving the law with these cuts, with the Pais and with the increase in the fuel tax.
“The parliamentary setback costs the fiscal package a reduction in the adjustment of 0.5% compared to what was presented to the IMF or 0.8% compared to the original program. For the moment, take 0.5% of GDP from other sources does not mean “as a major challenge, although, once again, the risk refers to the fiscal sustainability of an adjustment of a magnitude that relies increasingly on spending cuts and less and less on tax increases”, says a report by the consultancy firm PxQ.
Without congressional support, Milei engaged in a harsh confrontation with the governors. In this framework, Gita’s presence aims to strengthen support for the government and unlock reforms at a time when the economy is experiencing a sharp recession. Due to the impact of inflation on income, consumption and activity, the IMF expects a decline of 2.8% in 2024.
On January 31, the Fund approved the disbursement of $4.7 billion with which the government paid maturities of $1.9 billion that month and $600 million in interest in February. In exchange, Argentina pledged to achieve a primary fiscal surplus of 2% of GDP by the end of this year and to accumulate $10 billion in reserve purchases by the end of 2024.
Source: Clarin
