Argentina is pushing international lending to its breaking point
The IMF has no good options—but it may have just selected the worst
The Argentine economy hangs by a thread. So far this year, the peso’s black-market value has fallen by half against the dollar and annual inflation has hit 113%. The only foreign-currency reserves left are lent by China. Policymakers are torn between printing pesos to cover the government’s bills and the need to avoid hyperinflation. Ahead of presidential elections in October, much is riding on the candidates’ proposed fixes. Javier Milei, a libertarian economist who once smashed a model of the central bank on live tv, and who unexpectedly prevailed in recent electoral primaries, would scrap the peso and make the American dollar Argentina’s legal tender.
Yet the economy may implode before any candidate gets to fix it. On August 23rd the government persuaded the imf to release a $7.5bn tranche of its bail-out programme, its only hope of meeting dollar-debt repayments and staving off default. The imf’s reluctance stemmed not from the fact Argentina is broke—lending to such countries is the fund’s purpose—but from the fact that most of the cash Argentina must repay this year is promised to the fund itself. Argentina is a rare country with the imf as its biggest creditor, owing the fund a cool $40bn, roughly a third of its external debt. By providing support, the imf has delayed disaster. It has also prolonged an increasingly absurd situation.
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This article appeared in the Finance & economics section of the print edition under the headline “Perma-crisis”
Finance & economics August 26th 2023
- China’s economy is in desperate need of rescue
- What China’s economic troubles mean for the world
- America’s astonishing economic growth goes up another gear
- Goldman Sachs has a David Solomon problem
- Argentina is pushing international lending to its breaking point
- Which animals should a modern-day Noah put in his ark?
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