Argentina Says Making Progress in IMF Talks

Argentina “made progress” on Tuesday in talks with the International Monetary Fund aimed at securing an accelerated disbursement of a $50 billion loan it hopes will calm its debilitating economic crisis.

IMF Managing Director Christine Lagarde said she and Argentina’s Finance Minister Nicolas Dujovne held “discussions about how the fund can best support Argentina in the face of renewed financial volatility and a challenging economic environment,” AFP reported.

Lagarde said talks would continue on Wednesday, aiming to reach “a rapid conclusion to present a proposal to the IMF executive board.”

Dujovne said it was too early to “give figures when we’re in the middle of discussions with authorities.”

The peso has lost half its value against the dollar this year, hampering government efforts to get inflation under control. Argentina has already used a first $15 billion tranche of the three-year line of credit agreed in June, mainly to prop up its currency.

Analysts warned that failure to reset the terms of the IMF loan would be costly.

“Failure to secure further IMF funding or fiscal slippage before large debt repayments due in November would make default a very real possibility,” said Capital Economics in a note.

Andres Abadia of Buenos Aires consultancy Pantheon said Argentina’s austerity measures “should be seen as a positive, but market confidence in Argentina remains fragile”.

“The meeting with the IMF will probably help to have a clearer picture of the country’s prospects,” Abadia added.

The Washington talks come a day after President Mauricio Macri announced he is slashing the number of government ministries by half and restoring a tax on booming grain exports to bring deficits under control.

The move signaled the abandonment of a gradualist approach to reducing inflation by the market-friendly president, who was elected in 2015. “We must move a lot faster,” Macri said in a televised address.

Macri, a center-right politician elected on a commitment to economic reform, appealed to rich exporters to do their bit. “We know that this is a bad tax, but I have to ask them to understand that it is an emergency and we need their contribution,” he said.

At the current exchange rate, the move would put an extra $7.1 billion in state coffers.