IMF says war in Ukraine will impact program goals with Argentina

The International Monetary Fund said on Thursday that the economic consequences of the war in Ukraine will impact on meeting the goals of the new credit program agreed with Argentina.

The agreement between the IMF and Alberto Fernández's government, which has yet to be ratified by the Argentine Congress and approved by the Fund's executive board, aims to begin to reduce the high inflation that has been plaguing the South American country for years, which last year exceeded 50%.

“The program seeks to start reducing persistent high inflation,” said IMF spokesman Gerry Rice. “This, of course, will be a challenging task in the light of the evolution of the world situation, as rising commodity prices are affecting inflation worldwide.”

Rice said Argentina is already feeling the economic effects of the Russian invasion of Ukraine, launched by Russian President Vladimir Putin on February 24.

“Argentina, like other emerging economies, is already being affected by the war in Ukraine, including with the rise in world commodity prices that is already affecting inflation,” he explained at a press conference.

“IMF technical staff are assessing the broader potential impact on growth, as well as on external accounts and fiscal balance. However, the uncertainties remain great and depend on the duration of the conflict,” Rice added.

The IMF and the Argentine authorities announced on March 3 an agreement to restructure a debt of some $45 billion, legacy of a record loan of up to 57 billion granted in 2018 under a program that, at the end of 2021, the Fund itself considered failed.

Rice noted that the new agreed program presents a “multiple strategy” to lower inflation, which “involves a reduction in monetary financing of the fiscal deficit, and a new framework for the implementation of monetary policy to generate positive real interest rates to support demand for peso assets.”

Inflation in Argentina was 50.9% in 2021; it reached 36.1% in 2020, the year of economic paralysis due to the covid-19 pandemic, and in 2019 it reached 53.8%.

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