The International Monetary Fund has approved the disbursement of US$800 million on Monday, recognizing the progress made by the government of Javier Milei in implementing its adjustment plan. However, the IMF warned of potential “imbalances” that could complicate the path to stabilization.
In its latest staff report, the IMF reviewed goals for the first quarter and estimated a deeper recession than initially expected, with activity expected to fall by 3.5%. Monthly inflation is predicted to close around 4%, which represents a slowdown from previous estimates. Despite meeting all goals until the end of March with margins, the IMF warned of persisting macroeconomic imbalances and obstacles to growth.
Efforts must continue to expand political and social support for reforms and protect vulnerable populations. The IMF recommends further reforms in tax, retirement, and income-sharing systems. The government plans to rationalize tax expenditures, consider eliminating some rates, pass a fiscal package through Congress to support sanitation efforts, and adjust monetary and exchange rate policies as needed.
The economic team is willing to cut subsidies and impose stricter limits on subsidized electricity to achieve objectives. Additionally, there will be a subsidy cut of 0.7% of GDP and potential new increases in energy rates as part of ongoing efforts to stabilize the economy. The Fund expects these measures will complement the adjustment plan and ensure fiscal balance while avoiding risks from recession and less favorable export prices.
