Argentina’s Economy Minister Rejects IMF Currency Devaluation Demands

Luis Caputo, Argentina’s Economy Minister, denies IMF demands for currency devaluation as part of a new financing deal. The government is pursuing a loan agreement with the IMF, targeting completion within two months. Congressional approval is crucial for the deal, which aims to recapitalize the Central Bank without increasing debt. The administration is optimistic, with positive trends in inflation and poverty being noted.

Luis Caputo, the Economy Minister of Argentina, firmly stated that the International Monetary Fund (IMF) has not insisted on devaluating the Argentine peso in order to secure new financing. In a recent radio interview, he remarked, “It is true that there are high prices in dollars [in Argentina], but devaluation is not the solution.” He suggested that lowering taxes and enhancing competition in the marketplace would be more effective solutions to the economic challenges faced by the country.

President Javier Milei’s administration aims to finalize a new loan agreement with the IMF within the next two months. A statement from Milei’s office indicated plans to submit a decree to Congress for legislative approval of this agreement, which includes a public credit operation to refinance existing debts owed to the Central Bank. Spokesperson Manuel Adorni emphasized that this agreement should be concluded within the first quarter of the year.

In expressing optimism for a swift resolution, Caputo noted that many aspects of Argentina’s economic program have already been negotiated with IMF representatives. He suggested that any delay in reaching an agreement would mainly arise from difficulties in garnering congressional support or administrative hindrances from the IMF.

Adorni further indicated that a possible agreement would involve the recapitalization of the Central Bank and reiterated that such an arrangement would not exacerbate the national debt. He reiterated the necessity of congressional involvement in the deal, given the legal requirements established by the IMF, as highlighted by Cabinet Chief Guillermo Francos.

The Argentine government and the IMF confirmed negotiations for a new financing program in December, although the exact amount sought remains undisclosed. The discussions follow Argentina’s previous program, initially amounting to US$57 billion, which was renegotiated in 2022 but faced significant challenges that led to its collapse by the end of 2024.

While the administration seeks new funds to strengthen the Central Bank’s reserves, reports indicate that Argentina might be looking for fresh financing in the range of US$10 to US$20 billion. Analysts have speculated on various configurations for the potential aid package, suggesting that around 30% may be accessible in 2025.

Milei’s government hopes to utilize these funds to bolster the Central Bank’s dollar reserves and improve the overall economic outlook. Although intentions to lift strict currency controls remain unclear, Adorni affirmed they would be removed once conditions allow.

Caputo has expressed hope for an agreement soon, stating that most details have already been settled. Meanwhile, IMF officials commended the Milei administration’s economic stabilization efforts, mentioning progress in reducing inflation and returning the economy to growth. Despite ongoing challenges, there has been a notable decline in poverty levels, offering some optimism for Argentina’s economic future.

In summary, Economy Minister Luis Caputo has rejected the notion that the IMF requires currency devaluation for a new financing deal. The Argentine government, under President Milei, is actively pursuing an agreement that may provide substantial funds for economic recovery without increasing national debt. While congressional approval remains a vital component of this process, the administration remains hopeful about finalizing the deal within the set timeframe. As the negotiations progress, positive advancements in inflation and poverty reduction have been acknowledged by the IMF, signaling a potential path toward economic stabilization for Argentina.

Original Source: www.batimes.com.ar