Argentina’s Economy Minister Denies IMF Currency Devaluation…

Economy Minister Luis Caputo denied IMF demands for Argentina to devalue its currency in exchange for new financing. The Milei administration is targeting a loan agreement within two months, necessitating congressional approval. The deal aims to refinance existing debts and bolster the Central Bank’s resources amidst ongoing negotiations with the IMF.

On Thursday, Economy Minister Luis Caputo asserted that the International Monetary Fund (IMF) has not required Argentina to devalue its currency for a new financing deal. During a radio interview, Caputo emphasized, “Devaluation is not the solution” and suggested that reducing taxes and increasing competition would address the high dollar prices in Argentina.

President Javier Milei’s administration is currently negotiating a fresh loan agreement with the IMF, aiming to finalize it within two months. His office plans to submit a decree to Congress seeking legislative approval for the deal, which is intended to facilitate a public credit operation for the National Treasury to settle existing debt with the Central Bank.

Presidential Spokesperson Manuel Adorni noted that the agreement, alongside a previous US$44-billion loan, should be concluded in the initial four months of the year. He confirmed that more details would be disclosed as they become available, indicating that congressional approval might cause delays in finalizing the agreement.

The agreement is expected to entail the recapitalization of the Central Bank, with Adorni asserting it would not increase debt. He emphasized that Congress would play a role in assessing the deal’s viability, although it remains unclear when lawmakers would participate in the negotiations.

Cabinet Chief Guillermo Francos remarked that due to legal requirements, a decree approval by Congress is infeasible, as it is essential to maintain legal certainty per the IMF’s stipulations. In December, negotiations about a new financing program were confirmed, although specific fund requirements have yet to be disclosed.

Previous IMF engagements with Argentina became strained, culminating in the collapse of the last agreement in 2024. Any new agreement would focus on refinancing the outstanding debt from prior financial support.

The IMF’s spokesperson deemed the ongoing discussions productive but noted the importance of congressional backing for effective program implementation. Caputo reiterated that the new program would result in fresh funds to bolster the Central Bank, reiterating that this would not exacerbate gross debt levels.

Domestic reports speculate that Argentina is seeking a fresh funding of US$10 billion, while some estimates suggest up to US$20 billion could be on the table, with significant portions earmarked for principal and interest obligations during Milei’s term. The necessity for the funds aligns with Milei’s policy of austerity aimed at controlling inflation and achieving budget surplus.

The government remains non-committal about the timeline for lifting stringent capital controls. Caputo has indicated that only minor details require resolution for the expected agreement. As discussions advance, IMF officials have commended the government’s strategies for economic stabilization and growth, noting positive developments in inflation reduction and poverty alleviation.

Economy Minister Luis Caputo has refuted claims that the IMF requires currency devaluation for a new financing deal, advocating for tax reductions and competition as alternatives. President Javier Milei’s administration is working on securing this deal while emphasizing congressional involvement in the process. The IMF continues to encourage support from Congress to ensure the proposal’s success. Analysts suggest that Argentina is pursuing significant new funding to support its economic recovery initiatives, while the government has made encouraging strides in controlling inflation.

Original Source: www.batimes.com.ar