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IMF says Argentina spending splurge sharpens economic challenge

Published Sep 28, 2023 06:26PM ET
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© Reuters. FILE PHOTO: The International Monetary Fund (IMF) logo is seen outside the headquarters building in Washington, U.S., September 4, 2018. REUTERS/Yuri Gripas/File Photo
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By Rodrigo Campos

NEW YORK (Reuters) - The International Monetary Fund said on Thursday recent policy moves by Argentina's government, including wide-ranging tax breaks for individuals and sectors, were aggravating the country's already complex economic situation.

Argentina, battling inflation at 124%, negative net foreign currency reserves, a looming recession and a sliding peso currency, is the IMF's largest creditor with a $44 billion loan deal both sides are trying desperately to salvage.

The South American country is also headed for crunch general elections next month. Economy Minister Sergio Massa, the presidential candidate for the ruling Peronist coalition, is battling to stay in the race against two right-wing rivals.

The government in recent weeks has rolled out tax breaks for workers, certain sectors and preferential currency exchange measures for the energy sector, despite pledges to trim spending and improve the fiscal deficit.

"The recently adopted policy measures and announcements add to Argentina's challenges," IMF spokesperson Julie Kozack said in a scheduled press briefing, citing "very challenging and complex" economic situations.

"We are working to better understand and assess the impact of the recent measures and the need for offsetting actions that could be taken to strengthen stability and safeguard program objectives - while not adding to future vulnerabilities."

Kozack said ongoing engagement with Argentina "is in the interest of the fund," adding that it was "too early to speculate" on the precise timing of the next program review.

Asked about dollarization, a key election issue proposed by shock front-runner libertarian Javier Milei, Kozack said it is up to each country but "not a substitute for sound macroeconomic policies."

Massa and Milei face conservative former Security Minister Patricia Bullrich in what is seen as a competitive three-way battle for the presidency on Oct. 22. A November run-off will be held if no candidate wins outright.

IMF says Argentina spending splurge sharpens economic challenge

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