>He offers the only way out of a supremely difficult situation
>Javier milei can barely contain his excitement. Since December, when the imf’s last agreement with Argentina ran out, the country’s president has sought a fresh bail-out. Indeed, his efforts include an executive order to remove the need for Congress to approve the deal. On March 30th Argentina’s finance minister said that the government hoped for 40% of the money, which may amount to $20bn, up front. Three days later, Mr Milei hopped on a plane to Mar-a-Lago to meet Donald Trump and, he hoped, help close the deal.
>For the imf, the world’s emergency fund, this is a strange situation. Borrowers tend to arrive furious, dejected and desperate, and none more so than Argentina. Since its first bail-out in 1958, the country has become the fund’s most difficult customer, endlessly stacking up debts, which now come to $41bn (or 28% of all of the imf’s lending). Mr Milei’s first deal will be Argentina’s 23rd. As the fund contemplates just how much cash to hand over, the question is whether his vim can overcome the country’s spendthrift tendencies.
>Argentina’s most recent bail-out, agreed in 2022, exemplifies these tendencies. It was a bail-out of another bail-out, which went wrong after ministers failed to stop investors fleeing. Most of the cash went on paying back earlier loans. Targets the fund set for belt-tightening, liberalising regulation and removing capital controls became increasingly strict as time wore on, but Argentina failed to reduce its deficit, at the same time as it burned through foreign reserves. Politicians proved unwilling to risk painful reforms. The fund could do little to change their minds: it had sunk too much money into Argentina to make any threats of abandonment convincing.
>Mr Milei wants to work with the fund both because Argentina needs cash, and because the reforms it seeks have lots in common with his own. He has cut spending by 5% of gdp and slashed red tape since taking office in late 2023. In doing so, he has turned a fiscal deficit into a surplus, while sinking economic growth. Since he has also tamed inflation, however, his approval ratings remain solid.
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>He offers the only way out of a supremely difficult situation
>Javier milei can barely contain his excitement. Since December, when the imf’s last agreement with Argentina ran out, the country’s president has sought a fresh bail-out. Indeed, his efforts include an executive order to remove the need for Congress to approve the deal. On March 30th Argentina’s finance minister said that the government hoped for 40% of the money, which may amount to $20bn, up front. Three days later, Mr Milei hopped on a plane to Mar-a-Lago to meet Donald Trump and, he hoped, help close the deal.
>For the imf, the world’s emergency fund, this is a strange situation. Borrowers tend to arrive furious, dejected and desperate, and none more so than Argentina. Since its first bail-out in 1958, the country has become the fund’s most difficult customer, endlessly stacking up debts, which now come to $41bn (or 28% of all of the imf’s lending). Mr Milei’s first deal will be Argentina’s 23rd. As the fund contemplates just how much cash to hand over, the question is whether his vim can overcome the country’s spendthrift tendencies.
>Argentina’s most recent bail-out, agreed in 2022, exemplifies these tendencies. It was a bail-out of another bail-out, which went wrong after ministers failed to stop investors fleeing. Most of the cash went on paying back earlier loans. Targets the fund set for belt-tightening, liberalising regulation and removing capital controls became increasingly strict as time wore on, but Argentina failed to reduce its deficit, at the same time as it burned through foreign reserves. Politicians proved unwilling to risk painful reforms. The fund could do little to change their minds: it had sunk too much money into Argentina to make any threats of abandonment convincing.
>Mr Milei wants to work with the fund both because Argentina needs cash, and because the reforms it seeks have lots in common with his own. He has cut spending by 5% of gdp and slashed red tape since taking office in late 2023. In doing so, he has turned a fiscal deficit into a surplus, while sinking economic growth. Since he has also tamed inflation, however, his approval ratings remain solid.
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