Argentine president calls for extraordinary inflation steps

Bloomberg

Argentine President Alberto Fernandez called on his government to implement “all necessary measures” to combat 52% inflation that’s been aggravated by the surge of global commodity prices due to the Russia’s
invasion of Ukraine.
In a sombre, 18-minute speech, Fernandez said his ministers would start rolling out new measures without providing specifics. Earlier in the week, he declared a “war on inflation” shortly before data showed prices accelerating for a third straight month in February.
“We’re in an extraordinary situation that requires extraordinary solutions,” Fernandez said. His government’s focus “from this moment on will be implementing all the necessary measures to confront inflation.”
The government raised export taxes on soy meal and oil to 33% from 31%, according to a decree, which cited the invasion of Ukraine. It also created a “stabilisation fund” for wheat in a separate decree.
Fernandez’s speech comes a day after Argentina’s senate approved the government’s pending $45 billion agreement with the International Monetary Fund. The upcoming measures are likely not part of the policies outlined in the IMF pact, which could be approved by the
institution’s board next week.
Fernandez’s broad ruling coalition emerged divided after the IMF vote, with the inflation strategy a central issue. Some senators from his coalition voted against the deal, saying that this year’s target range of inflation of 38% to 48% “will never be met.”
The president said the war in Ukraine isn’t the root cause of Argentina’s inflation, but it’s “causing bigger problems.” Private economists outline other factors driving inflation higher in South America’s second-largest economy: The eventual unwinding of electric bill subsidies, a faster pace of controlled peso devaluations and wage negotiations with labour unions, among others.
Prices aren’t expected to ease soon since the food costs have climbed higher still in March and the government implemented a nearly 10% hike on fuel. Analysts at JPMorgan Chase & Co project annual inflation reaching 62% by the end of this year.
Meanwhile, the International Monetary Fund (IMF) announced that its board of directors will discuss Argentina’s $45 billion agreement, the final step of approval after two years of negotiations.
If approved, it would be Argentina’s 22nd IMF program and the latest chapter in the country’s tumultuous relationship with the Washington-based lender. The pending agreement would refinance payments owed from a record IMF bailout given to the previous government in 2018 that failed to stabilise the economy.
Argentina’s congress passed legislation this week that approved the IMF’s financing of the new deal, but not the economic policies underpinning the program. The agreement further exposed a divide within the ruling coalition led by President Alberto Fernandez, with several lawmakers in the far-left wing of the bloc voting against the deal.
Still, the IMF applauded the vote passing through congress.
Congressional approval “is an important signal that Argentina is committed to policies that will encourage more sustainable and inclusive growth,” IMF chief spokesperson Gerry Rice said in a statement.
The government also chose to bundle two payments due to the IMF for a total of about $2.8 billion into one single payment due on March 31, according to the IMF statement. The IMF said such a change is consistent with its rules and Argentina won’t enter into “arrears” or default as a result.
Upon board approval, Argentina would soon receive about $9.8 billion from the IMF to cover payments from a previous program and bolster the central bank’s reserves. The rest of the disbursements, totalling $45 billion, are conditioned to the government meeting certain fiscal and monetary targets in quarterly reviews.