Argentina strikes preliminary IMF deal
Argentina has reached a preliminary $44.5bn agreement with the International Monetary Fund that could mark the start of a new government effort to slash energy subsidies.
"We agreed that a strategy to reduce energy subsidies in a progressive manner will be essential for improving the composition of government spending," the IMF said.
Following months of negotiations, the Argentinian government celebrated the initial agreement, which is step toward restoring the shale-rich country's access to international capital markets and rebuilding investor confidence.
The talks highlighted deep divisions within the administration of President Alberto Fernandez, who will be at odds to dismantle subsidies across the energy sector, from the wellhead to electricity bills and the petrol pump.
"We had a problem, now we have a solution," Fernandez said. "We will be able to access new financing precisely because this agreement exists."
The IMF said the two sides "will continue their work in the coming weeks" to come to a final agreement.
Once a deal is finalized, it will go before the IMF board and Argentina's congress for approval.
United for Change, Argentina's main opposition coalition, said the preliminary agreement was "positive" because it would "avoid a costly default."
Argentina's sovereign bonds rose in value today after days of speculation over a possible default.
The new preliminary agreement marked the first concrete sign of progress in long negotiations that seek to refinance a $46bn loan that the previous administration of president Mauricio Macri had secured from the IMF, the largest in the organization's history.
Fernandez said the deal would not place limits on Argentina's spending, which his administration had vowed not to accept because it would curtail its ability to grow.
Economy minister Martin Guzman said the country would reduce its fiscal deficit and slash the central bank's financing of the treasury.
"We reached the best agreement we could achieve," Guzman said.
The "deal would gradually and sustainably improve public finances and reduce monetary financing" but would also "allow for spending increases on infrastructure and science and technology, and would protect targeted social programs," the IMF said.
As part of the deal, IMF staff will visit Argentina every quarter to evaluate whether the terms of the agreement are being fulfilled.
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