Reuters | Jun 08, 2018 21:23
By Luc Cohen and Jorge Otaola
BUENOS AIRES (Reuters) - Argentina could revise the fiscal targets set as part of a $50 billion (£37.3 billion) financing arrangement with the International Monetary Fund to increase spending on social programs, an IMF director said on Friday.
Argentina requested IMF assistance on May 8 after a run on its peso currency in an investor exodus from emerging markets. The country's stocks rallied on the deal to provide a safety net and avoid the frequent crises of the country's past.
Many Argentines blame the austerity measures the IMF imposed under a previous bailout during its 2001-2002 economic crisis for plunging millions into poverty, but the organisation said spending on programs to protect the poor could actually increase under the financing arrangement.
"The fiscal targets can be revised in case there is a need to increase social spending," said IMF Western Hemisphere Director Alejandro Werner, adding that Argentina's economy today is "very different than 2001."
"That way, society does not have to choose between building a bridge or protecting the poorest."
As part of the deal announced Thursday night, the government agreed to speed up reductions in the primary fiscal deficit to balance the budget by 2020. The government also pledged to propose legislation for a more independent central bank to fight double-digit inflation, which Werner praised on Friday.
Opposition politicians aligned with former populist President Cristina Fernandez have said market-friendly President Mauricio Macri was repeating earlier mistakes.
"Argentines do not want to go back to the past. It cost us a lot to get away from the Fund, and we do not want to go back there," said Carlos Castagneto, a lawmaker aligned with Fernandez.
The benchmark Merval stock index (MERV) rose 3.8 percent on the deal. Bonds rose modestly, with Argentina's country risk <11EMJ> - a J.P. Morgan measure of the difference between the country's bond yields and less risky alternatives - down five points at 476 as of 3:56 p.m. local time (1746 GMT).
Argentina's 100-year bond maturing in 2117
"The deal between Argentina and the IMF reduces immediate external financing risks and will help speed up fiscal consolidation," said Gabriel Torres, a vice president at credit rating agency Moody's.
The deal still needs approval from the IMF board, which is expected to discuss it at a June 20 meeting. Treasury Minister Nicolas Dujovne said on Thursday he expected Argentina to receive a disbursement of 30 percent of the total, or roughly $15 billion, in the days following approval.
Finance Minister Luis Caputo said the government would not necessarily use the rest of the money and may return to bond markets to finance the estimated $22 billion in financing Argentina needs in 2019 to cover its fiscal deficit.
"If you need it you can use it, but if we regain access to the market at good rates, it is better to save it," Caputo told investors on a conference call, according to a Finance Ministry statement.
For the past few weeks, the central bank has offered to sell $5 billion in reserves at 25 pesos per dollar every day, effectively preventing the currency from falling below that level. That offer did not appear on Friday, traders said.
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.