The International Monetary Fund (IMF) expressed its support for the government's economic program on Tuesday after the electoral defeat in the province of Buenos Aires and amid the Treasury's intervention in the foreign exchange market to contain pressure on the dollar.

IMF spokesperson Julie Kozack stated: "IMF staff are working closely with the Argentine authorities in implementing their program to strengthen stability and improve the country's growth prospects."

In a statement released on X, Kozack added: “We support their commitment to ensuring the sustainability of the program’s exchange rate and monetary framework, as well as their continued adherence to the fiscal anchor and the comprehensive deregulation agenda.”

This was the first statement from the international organization since the Treasury, under the leadership of Pablo Quirno, launched a dollar sales program last week on the Single Free Exchange Market (MULC), a measure adopted to stem the escalating exchange rate in a context of falling foreign currency income from agricultural products and increased demand for hedging.

The IMF support comes at a time of heightened sensitivity for the government, following Fuerza Patria's resounding victory in Buenos Aires province, which deepened doubts about the soundness of the economic program.

Government reaction and analysts' warnings

Following the Fund's message, President Javier Milei responded on social media:"As I stated on Sunday, we will not budge one inch from the economic program." The president reaffirmed that his administration's priorities are: "First, fiscal balance; second, a tight monetary market; and third, the exchange rate. The exchange rate bands agreed upon with the IMF remain in place. In addition, we will continue deregulation."

On Sunday, after learning of the electoral defeat, Milei had already warned:"It won't be modified, but rather it will be redoubled. We will continue to defend fiscal balance tooth and nail, we will maintain the exchange rate system, we will continue to redouble our efforts on our deregulation policy, and we will improve our Human Capital policy."

Along those same lines, he emphasized: “We will continue to be on the side of good in the world. We will not retreat one inch in government policy; not only will we reaffirm our course, but we will deepen and accelerate it even further. We are not willing to surrender our model that lifted 12 million people out of poverty.”

Meanwhile, analysts warned that the foreign exchange intervention impacts the reserve accumulation target. According to the consulting firm Outlier,"these interventions reinforce the need to replenish reserves until the next IMF target, which was estimated at US$6.1 billion before the sales began."

For its part, Bank of America projected that the government will attempt to resume accumulating reserves after the October legislative elections in order to maintain its debt payment commitment.

The new goals with the IMF

In its latest review, the Central Bank accepted a government corrective plan for failing to meet its June targets. The new framework made the objectives more flexible: the Central Bank will no longer have to show a positive balance of US$2.4 billion at the end of the year, but will be able to show a negative balance of US$2.6 billion.

The Fund also modified the frequency of its reviews, which will be held semiannually instead of quarterly, giving the Executive Branch greater political leeway. However, the IMF insisted on the need to maintain fiscal discipline, strengthen foreign currency accumulation, and advance the economic deregulation program.

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