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In a statement on 18 March, the International Monetary Fund
(IMF) allowed Argentina to allocate additional funds to social
programs in the framework of the USD57 billion stand-by arrangement
(SBA), with the next tranche (USD10.87 billion) to be disbursed
over the coming weeks.
Under the SBA, Argentina committed to implementing deep
austerity measures to reduce the primary fiscal deficit to 0% of
GDP in 2019. The deal, however, includes a social assistance
adjustor that allows a deficit of 0.2% of GDP should additional
funding be required for welfare programs if lower classes are
severely undermined, including by reduced utility and transport
subsidies.
In the same statement, the IMF praised Argentina's on-target
2018 primary fiscal deficit (2.7% of GDP), but warned that deeper
restraint in social spending will be needed to meet the 2019
target. As this will affect middle and lower classes, the IMF
raised the social assistance adjustor to a deficit of 0.3% of GDP.
Earlier in March, President Mauricio Macri announced an extra ARS15
billion (USD370 million) for child benefits and payment facilities
for a new gas tariff increase to be implemented in April.
Significance
The deep austerity measures have severely undermined the
government's popularity ahead of the 27 October presidential
elections, significantly affecting Macri's chances of
re-election.
The government is likely to use the additional IMF funding
allowance at its disposal (approximately USD500 million) in the
run-up to the election to quell concerns over rising poverty (at
33%) and loss of purchasing power. This is likely to help contain
anti-government protests, often led by social organisations, but it
is unlikely to be effective in enhancing the government's chances
of re-election.
The whole population will still be confronted by high-inflation
(forecast at 35.2% in 2019 by IHS Markit), rising unemployment
(estimated at 13.2% in 2019), and economic recession (GDP is
expected to contract by 1.7% in 2019). An indicator of increased
chances for Macri ahead of the election will be a downward
inflation trend - the population's main concern, according to
polls. An indicator of a weaker government will be labour unions
organising a general strike in the coming months.
