Divisions in Argentina’s ruling leftist coalition were laid bare after a group of senators sent a letter to the IMF that threatened to sour fresh negotiations between the government and the multilateral lender over the repayment of a $44bn loan.
Peronist senators loyal to Cristina Fernández de Kirchner, the radical vice-president and leader of the senate, demanded in a letter dated Monday that the IMF refrain from attaching conditions to a new programme, and that the fund should publicly accept its share of responsibility for Argentina’s ongoing economic crisis.
The letter also pushed for Argentina to be granted a five-year grace period before repaying the $44bn lent to it since a 2018 currency crisis, as well as a significant reduction in interest rates and a repayment schedule spread over several decades.
The senators’ message contrasts with more conciliatory moves by economy minister Martin Guzmán in recent weeks.
Such moves have included eliminating subsidies implemented to alleviate the impact of the coronavirus crisis and effectively reduce pensions payouts.
They have been interpreted as part of a shift towards greater economic orthodoxy in an attempt to cut Argentina’s fiscal deficit and win over IMF officials who are visiting Buenos Aires. Negotiations for a new programme kicked off last week to agree terms for the repayment of Argentina’s $44bn debt with the fund — making it the lender’s largest debtor country — which could include extending maturities and potentially even fresh financing.
The contrasting messages from Argentina’s government has raised concerns that Ms Fernández is indirectly meddling in the negotiations. A former president herself, she is seen as Argentina’s most powerful politician and recently published an open letter that many interpreted as distancing herself from President Alberto Fernández.
Many analysts hope that an agreement with the fund — which few expect to happen before next year — could help to win back market confidence and stem an alarming decline in net foreign exchange reserves that are now in negative territory, threatening an imminent currency devaluation.
Investors have consistently criticised the government’s failure to communicate a coherent and credible economic plan to cut the fiscal deficit without printing new money, stabilise the volatile currency and control runaway inflation. Consumer prices rose by 3.8 per cent in October, the highest increase so far this year.
Fund officials are understood to be frustrated at the way Argentina's government has politicised the talks for the benefit of a domestic audience, which harbours widespread rejection of the institution that has a chequered past in the country — especially given its role in the 2001-02 financial crash.
The IMF declined to comment on the letter.
The nine-page letter also dredged up the controversy over the IMF’s record bailout package for the previous centre-right government of Mauricio Macri. Opponents claim it was pushed by Donald Trump, US president, to help one of his closest allies in the region win last year’s presidential elections — even if it backfired and only helped to finance capital flight, according to critics.
The letter closed by citing the Argentine Pope Francis I, who has consistently expressed support for Mr Fernández: “Debts [should not] be repaid through unbearable sacrifices.”
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