(Bloomberg) -- The International Monetary Fund said that a record $56 billion program for Argentina didn't succeed “in improving confidence” and was “fragile from its inception” despite the size of the loan, and that both capital flow management and a private debt reprofiling might have been addressed back in 2018.
The staff report released Wednesday, known as “ex-post evaluation” and led by IMF deputy director Odd Per Brekk, is a key step in IMF procedures, which require a staff review of a program with exceptional access.
“An early debt operation, combined with reintroduction of capital flow management measures, could have delivered a more robust program,” the report said. Though the evaluation added that the need for a debt operation wasn't clear at the beginning of the program, it was later ruled out by Mauricio Macri administration.
Argentina's three-year stand-by arrangement, with total disbursements for as much as $44 billion, represents more than 10 times the country's allowance with the Fund. President Alberto Fernandez administration is negotiating a new program with the IMF to reschedule payments owed to the Washington-based multilateral lender.
Here are some key takeaways from the IMF's report:
IMF Staff's Evaluation
- “Greater burden sharing with other official creditors could have, besides providing additional financing, signaled broader support from the international community, both of which could have supported confidence”
- “Lack of ownership by all branches of government was fatal for the program,” the report added
- “Rapid exchange rate depreciation starting in mid-2018 made the targeted disinflation path unrealistic due to the high pass through”
- Existing debt instruments were “highly problematic”; central bank liabilities known as LEBACs “were not well understood at the time of the program request”
Argentina Views
- Stand-by agreement was an “IMF-financed bailout to private creditors and to investors that had been speculating over carry trade opportunities”
- Real goal of the program was to maintain 2018 government policies “at all costs, with IMF financing”
- Inflation needs to be considered as a multicausal issue in future programs, and it can't be addressed only by monetary policy
- IMF needs to revise “political use” of their programs, reconsider meaning of ownership
- “Program achieved nothing for Argentina other than massively aggravating a balance of payment problem”
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