President Javier Milei of Argentina is set to meet with the head of the International Monetary Fund (IMF), Kristalina Georgieva, in Italy this week. The meeting comes as Argentina seeks a new program to lift capital controls and attract investment. Milei's talks with Georgieva will take place after the IMF's executive board votes on the latest review of Argentina's $44 billion program. Argentina has already ended its policy of negative real interest rates on Treasury auctions, a key demand of the IMF. The Central Bank's benchmark lending rate has also been reduced from 133 percent to 40 percent since Milei took office. Milei estimates that around $15 billion would be required to lift currency controls, but not all of it would need to come from the IMF. Negotiations with the IMF are expected to take some time. The board vote, once approved, would free up approximately $800 million for debt repayments. In addition to the meeting with Georgieva, Milei will also hold bilateral talks with Emmanuel Macron and deliver a speech on artificial intelligence at the G7 summit. Afterward, he will travel to Switzerland for a conference on the war in Ukraine and a meeting with President Volodymyr Zelenskyy. Meanwhile, in Argentina, Milei's government is working to pass its 'omnibus' bill and fiscal package through a general vote. The fate of many measures in the bill will be determined through a chapter-by-chapter vote.
The International Monetary Fund (IMF) has approved the eighth review of its agreement with Argentina, allowing for a disbursement of $800 million to the country. The disbursement will support Argentina's efforts to entrench the disinflation process, rebuild fiscal and external buffers, and underpin the recovery. This brings the total disbursement under the agreement to approximately $41.4 billion. The government of Argentina stated that it would consider lifting currency controls but only if it does not risk progress in fighting inflation and accumulating reserves. The government also promised to cut taxes, starting with the PAIS tax on U.S. dollar transactions, once the Ley Bases is enacted. Economy Minister Luis Caputo and his team traveled to Washington in May to discuss a staff-level agreement with the IMF. The IMF's First Deputy Managing Director, Gita Gopinath, welcomed the completion of the review and emphasized the need for continued efforts to build on the gains made so far.
However, the IMF's recommendations contradict the government's economic plans. The staff report from the IMF's eighth review of Argentina's economic program stated that the country remains 'firmly on track,' but recommended that Argentina devalue its currency faster and lift exchange controls. This contradicts announcements made by Economy Minister Luis Caputo regarding the cepo, dollar blend, and devaluation rate. The report also highlighted the need for the government to improve the quality of fiscal adjustment and scale up social assistance to protect vulnerable groups. The staff report outlined that the government would eliminate the 80:20 preferential export scheme in June, but Caputo stated that the scheme would remain untouched. The report also mentioned that the government would devalue the currency quicker, while Caputo said the devaluation rate would not change. The Argentine authorities committed to unwinding the foreign exchange restrictions and developing a framework for easing the controls. The government is negotiating a new program with the IMF to obtain fresh funds. The government also pledged to eliminate the PAIS tax and unify the exchange rate as conditions permit. The IMF's recommendations contradict the government's economic plans.
International Monetary Fund Managing Director Kristalina Georgieva visited the Itaipú Hydroelectric Power Plant and other Paraguayan tourist attractions before starting a series of engagements in the South American country this week. Her agenda includes encounters with government officials, women leaders, and representatives of civil society and the private sector. Georgieva highlighted Paraguay's growth as one of the fastest expanding economies in Latin America. The latest IMF projections show that Latin America's economy will grow by 1.9% in 2024, with Paraguay projected to have a 3.8% progress this year. After Paraguay, Georgieva will travel to Rio de Janeiro for a meeting of G20 Finance Ministers and Central Bank Presidents on July 25 and 26.