As a result of a severe drought, Argentina is expected to enter into a recession, which has prompted the government and the International Monetary Fund (IMF) to reevaluate the country's $44 billion program. An anonymous official from Argentina's Economy Ministry has revealed that all options are being considered during the fifth review of the program, which is the largest in the history of the IMF. The official also stated that discussions are confidential, and the IMF has declined to comment.
This is another setback for Argentina's program, which has already experienced several changes in the past year. The IMF changed a key target for the third time recently, with officials and Argentine officials reducing the level of net reserve accumulation needed for the central bank this year from $4.8 billion to $2.6 billion. The IMF's executive board approved a $5.4 billion disbursement to Argentina two weeks ago, bringing the total disbursements under the extended fund facility to $28.9 billion. However, the IMF's growth forecast for Argentina has been slashed to 0.2% of GDP from 2% previously, and economists in Buenos Aires are predicting a 4% contraction.
Inflation is also a serious concern for Argentina. Government data released on Friday showed that prices rose 104% in March from a year ago, and economists at JPMorgan Chase & Co. are forecasting 130% inflation by the end of the year. Despite these challenges, the IMF has kept the key primary fiscal deficit target for this year at 1.9% of GDP, stating that achieving this target remains essential to the program.
In the meantime, the Inter-American Development Bank has announced that it will provide financial assistance to Argentinian producers affected by the drought. The bank will provide approximately $1 billion by June to help alleviate the economic impact of the drought on the country's producers.