Argentine officials arrived in Washington, DC on Tuesday for crisis talks with the International Monetary Fund (IMF) to renegotiate conditions of a $50bn loan to help its ailing economy.
Treasury Minister Nicolas Dujovne is seeking to secure an early release of funds from the three-year relief package, which he said would allow the government to avoid asking the bond market for financing in the near term.
The IMF has indicated a willingness to accelerate payments, with its head Christine Lagarde stressing her support for Argentina’s policies in an August 29 statement. She said IMF staff had been instructed to work with Argentine officials to “re-examine the phasing of the financial programme”.
The $50bn bailout – the biggest loan in IMF history – has provoked widespread protests in Argentina, where many blame the financial body for the country’s worst ever financial crisis during 2001-2002, which left one out of every five people unemployed and thrust millions into poverty.
Tuesday’s meeting comes a day after President Mauricio Macri announced drastic new measures to control the slide of the country’s currency, including slashing the number of government ministries by more than half and reintroducing taxes on exports.
The peso has lost more than half of its value against the dollar this year, aggravating inflation and sending Argentinians to currency exchanges in search of dollars.
|Many Argentinians are wary of the IMF, which they blame for contributing the economy’s collapse 17 years ago [Eitan Abramovich/AFP]
The new austerity measures followed a decision by the country’s Central Bank to raise interest rates to 60 percent – the world’s highest.
Analysts have welcomed the apparent abandonment of the gradual approach to reducing inflation by the business-friendly president, who was elected in 2015 and is expected to seek re-election in next year’s presidential race.
“I think the government is attacking the problem in a reasonable way,” said Esteban Medrano, an Argentine market analyst.
“The negative side of this is that those efforts are not necessarily popular and don’t add up to votes. I think the government is trying to anticipate that electoral year by trying to do as much as hard as possible this year,” he told Al Jazeera.
Nicolas Saldias, a researcher at the Washington, DC-based Wilson Center focusing on Argentine politics and economics, said the new measures were “necessary” to boost investor confidence, but warned they could have the opposite effect.
“The measures are rather stark. They’re cutting back on public works quite significantly, which has the potential to worsen the recession,” he told Al Jazeera.
The export taxes “could also have a recessionary impact” if businesses feel less willing to send goods abroad, Saldias added.
On Tuesday, United States President Donald Trump offered his support to Macri in a telephone call.
“I have confidence in President Macri’s leadership and I strongly encourage and support his engagement with the International Monetary Fund,” he said in a statement following the conversation.
|State workers were among those protesting layoffs and the dismal state of the economy [Marcos Brindicci/Reuters]
Following Monday’s announcement, hundreds of protesters took to the streets to rally against the worsening economic situation.
“When you see what the government is doing, you know that the only thing we can expect is more layoffs [and] a deteriorating situation for those who need work,” said Sebastian Rivera from the State Employees Labour Union.
The government had expected inflation to be between 15-20 percent this year, but the figure is now running above 30 percent.
Public reaction has hampered Macri’s efforts to push through previous budget cuts, particularly to social spending. Last year, attempts to cut pension benefits were met with large protests with security forces using tear gas and water cannon against demonstrators.
Argentina is Latin America’s third-largest economy and currently has an unemployment rate of about 9 percent.
According to the World Bank, more than 28 percent of its 43 million people live in poverty.