$50bn would be given to Argentina as debt to spruce up its debacle economy by the International Monetary Fund,
However, the IMF board still needs to pass the three-year agreement.
Following the local currency of Argentina hitting record lows on May 8, the country had approached the fund for help. the economy of the country has been in problem for years now.
As a part of the deal for the loan, Argentina would have to manage its inflation which is in double digits as well as its public spending.
“The [Argentine] authorities have indicated that they intend to draw on the first tranche of the arrangement, but subsequently treat the loan as precautionary,” the IMF said in a statement on Thursday.
There are however many within Argentina who have criticized the decision of Argentine President Mauricio Macri’s to approach the IMF for assistance.
There is hatred against the IMF in Argentina as people there blame the fund for the 2001 economic downturn in the country following the IMF refused to continue supporting the country back then.
But the government would be helped by a fresh loan in its efforts to better and strengthen the economy, “giving us greater support to face this new global scenario and avoid crises like the ones we have had in our history”, Macri had said earlier.
Argentine authorities were congratulated on reaching the agreement by IMF Managing Director Christine Lagarde,
“As we have stressed before, this is a plan owned and designed by the Argentine government, one aimed at strengthening the economy for the benefit of all Argentines,” Lagarde said.
“I am pleased that we can contribute to this effort by providing our financial support, which will bolster market confidence, allowing the authorities time to address a range of long-standing vulnerabilities.”
It may appear that the IMF and Argentina are on opposite ends of the negotiations. However, both want the same thing.
The aim of both Mauricio Macri and Christine Lagarde is to reduce public spending so that inflation – which is the highest among the G20 nations, can be brought down to controllable limits.
It is being touted that reforms in the Argentine economy would be faster with the help of the $50bn loan.
One of the targets is reduction of the fiscal deficit to zero by 2020 which would be a year earlier than promised.
The reputation that it has in Argentina and that fact it is still blamed for the economic debacle of 2001 is known to the IMF.
Keeping this in mind, the fund has included a clause in the deal that would allow the Argentine government to be able to spend more on social programs if it felt necessary.
The IMF board is expected to vote on the deal in the coming days in Washington.
(Adapted from BBC.com)