The International Monetary Fund (IMF) has given Argentina something of break by easing economic targets in its $44 billion loan deal, but some rosier-than-reality program forecasts may be setting the South American country up for more failure.
The IMF this week cut the level of foreign currency reserves Argentina needs to build up by the end of this year by $1.8 billion, citing a major drought that has hammered production of top exports soy and corn. It sharply lowered the target for Q1.
"In our assessment, these forecasts are overly optimistic," Sergio Armella at Goldman Sachs wrote in a report, adding Argentina seemed unlikely to have even met adjusted reserves and fiscal targets for the recently completed first quarter. An IMF spokesperson said that a revision is forthcoming in the world economic outlook, and the Fund "will assess all end-March targets in the next review."Argentina - a serial defaulter which has long battled high inflation, currency weakness and indebtedness - struck a $57 billion deal with the IMF in 2018 to try and fix its economic woes. That deal failed and a new program was agreed last year.
"Evidence of weakening commitment, across the political spectrum, could endanger the completion of upcoming reviews." The IMF net reserve targets are the amount Argentina needs to accumulate over time above a baseline of $2.277 billion at the end of 2021. IMF officials said that by March 23 net reserves were around $1 billion below the March-end target.
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