(Bloomberg) -- In public, the International Monetary Fund sings nothing but praises for the austerity campaign Javier Milei has waged since winning Argentina’s presidency. Behind closed doors, however, the libertarian leader is still struggling to obtain more money from the IMF.
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Just three months ago Milei said his government would “certainly” have a new program with the IMF by year-end — replacing and potentially expanding the current $44 billion deal that’s already the largest ever granted by the Fund. But after another round of talks this week underscored concerns about capital and foreign exchange controls, it became clear that Milei has more work to do before seeking fresh funds from the Washington-based lender.
It’s certainly a frustrating outcome for the libertarian economist turned president. In less than one year in office, he’s implemented more austerity measures than the Fund requested, revving his chainsaw deep into public spending to cut the equivalent of 5% of gross domestic product in investment, pensions and public wages. Equally importantly, he’s been able to do so without unleashing the type of social unrest his opponents or even his team feared. In fact, recent polls show he’s retained most of his popularity so far, even as the economy falls into its sixth recession in a decade.
At the heart of Milei’s success is a war against inflation that has limited the increase of consumer prices to less than 4% a month, compared with more than 25% in December. Yet it’s the same obsession with prices that’s getting in the way of a new agreement with the IMF.
Even as Managing Director Kristalina Georgieva says her priorities for Argentina are aligned with Milei’s, negotiations for a new program continue to stall. The obstacle is Argentina’s edifice of capital and currency controls, known locally as the cepo, which the country needs to dismantle to return to capital markets and obtain much-needed investment to grow again.
Asked about the talks that have taken place with Argentina this week, Luis Cubeddu, the IMF’s lead Argentina negotiator, said the Fund has stressed the progress in reducing inflation and establishing a strong fiscal anchor, while also emphasizing remaining challenges.
“We discussed the need to gradually unwind some of the existing FX restrictions and controls,” he told reporters on Friday. “The discussions have deepened in an effort to better understand their plans. Authorities are exploring the options for them to move to a new program.”