Hugh Bronstein

BUENOS AIRES, (Reuters) – Argentina will agree a long-term economic strategy with International Monetary Fund staff, before submitting it for Congress. This is according to a government source. The talks are continuing to reach a settlement to pay $45 billion to IMF.

The recent election saw the defeat of the ruling coalition in a crucial mid-term vote. Argentines are suffering high inflation, which has impacted their purchasing power. In order for Argentina to get out of the debts that it can’t pay, and to gain access to global financial markets, it needs to make an agreement with the IMF.

We intend to reach an agreement regarding an IMF-supported economic program. It is the intention of all governing parties to conclude that agreement this year,” a source who was directly informed of the discussions told Reuters.

The person stated that Argentina is currently negotiating its economic program with IMF staff.

An inquiry to the IMF for comment was not received.

Due to the sensitive nature of the discussions, the source said the remaining issues were agreeing on “the pace of fiscal consolidation” and “the speed at which monetary finance gets reduced.”

According to the person, government wants to increase funds through improved tax collections and agreements with multilateral lenders rather than cutting spending.

The source said that the problem is financing a fiscal consolidation path without imposing a reductionist spending policy.

Peronist leader Alberto Fernandez has pledged to not cut spending so that Argentina can recover from the long-term recession, which was worsened by the COVID-19 pandemic.

Since last year, the government has been in negotiations with IMF to return $45 billion from a loan arrangement that was canceled in 2018. This agreement had been signed by former President Mauricio Macron.

‘IN AGREEMENT’

As the coalition struggles to recover from Sunday’s humiliating defeat in its legislative election, where the Peronists suffered a first-time loss in Senate elections since 1983, negotiations are taking place.

After that defeat, President Fernandez stated in December that a multiyear economic plan would have been sent to Congress.

For a new deal to become effective, the IMF will have to agree. This plan will be discussed by Congress. Opposition parties will also be encouraged by the strong mid-term votes.

Although Peronists may have shown some signs of weakness, the source claimed that all members of the governing coalition are in favor refinancing IMF debt.

It is working to improve tax administration in the hope of increasing revenue and reducing tax evasion. Additionally, it is pushing for increased financing from other multilateral creditors like the World Bank.

The source stated that the government would have to increase revenue through better tax administration and multilateral lending in order to be in a position for a rollover agreement.

Inflation of over 50% is causing speculation on the market about possible currency shocks.

According to a government source, this is not planned. They also stated that “Neither side desires an abrupt rise in the exchange rate.”

Argentina’s economy shrank by 9.9% last fiscal year. The government predicts that it will grow by more than 9 percent in 2021.

The source stated that the company would recover “almost everything” in 2020.