IMF backs Milei’s veto of Argentina’s pension reform law

The International Monetary Fund (IMF) supported this Thursday (12) the veto of the government of Javier Milei to the pension reform law of Argentina and emphasized the importance of the country meeting its fiscal targets.

“We have taken note of recent developments in Congress and continue to emphasize the importance of meeting fiscal targets to support further reduction in inflation and improve overall policy credibility,” IMF spokeswoman Julie Kozack told a news briefing.

The Argentine Chamber of Deputies voted on Wednesday (11), in a special session, to maintain Javier Milei’s veto of the pension reform project, which represented a victory for the libertarian politician and his fiscal balance policies.

The additional increase for retirees and pensioners had been approved by a large majority. The bill established a monthly update formula for benefits that combined the inflation rate and the average variation in formal wages, in addition to an extraordinary adjustment of 8.1%.

In the opinion of Milei’s government, this meant “exorbitant expenses” for the State, which would put fiscal balance at risk.

The IMF has a debt refinancing agreement with Argentina, conditional on meeting certain fiscal and economic targets, and which contains reviews every three months.

In June, the agency’s Executive Board approved the eighth review of the agreement with the country, allowing for an immediate disbursement of approximately US$800 million.

So the ninth review is coming soon, and as Kozack said today, “data through mid-2024 suggest that fiscal and reserve targets have been met and that policymakers continue to address the long-standing imbalances facing the country.”

“The implementation of the program has resulted in a considerable reduction in inflation and there are signs of an incipient recovery in economic activity and real wages,” he added.

The total amount involved in the IMF agreement with Argentina amounts to around US$41.4 billion.