IMF’s 57 billion failed to cure Argentine experts： wrong prescription.

　　Argentina, which has entered a period of power change, is likely to repeat the same mistakes with the help of the International Monetary Fund (IMF).

　　After the current Argentine President macri unexpectedly lost the primary election, the Argentine peso experienced a week-long sharp depreciation. On August 20th, local time, IMF spokeswoman Gerry Rice said: "We are paying close attention to the recent developments in Argentina and are in continuous dialogue with the authorities. They are also making policy plans to solve the difficulties facing the country." In addition, he added that IMF staff will travel to Buenos Aires "soon".

　　The IMF came out because macri signed a $57 billion loan agreement with it in 2018, which is also the largest rescue project in the IMF’s history, aiming at urging Argentina to abide by stricter fiscal and monetary policies and restoring investors’ confidence. However, according to the situation in the past year, these measures have slowed down the economy and hit investor sentiment.

　　"As far as the IMF’s assistance to Argentina is concerned, it hopes to help Argentina tide over the debt crisis and return to the international financial market. It should be said that its original intention is good and it has actually provided debt assistance." Yue Yunxia, director and researcher of the Economic Research Office of the Latin American Institute of the China Academy of Social Sciences, said in an interview with the First Financial Reporter: "But the problem is that the IMF’s estimation of the nature of the Argentine crisis is biased."

　　Why didn’t the IMF’s good intentions bring a good result to Argentina’s economy?

　　The market is in panic

　　When macri made up his mind to sign a high loan agreement with the IMF, the Argentine fiscal deficit was as high as 11% of the gross domestic product (GDP). At that time, because investors were cautious about Argentine bonds, macri urgently sought help from the IMF. With the full support of the United States, Argentina quickly obtained a loan of 50 billion US dollars.

　　Yue Yunxia told the First Financial Reporter: "After macri took office, Argentina regained the rescue of the IMF. This is actually a landmark event, which means that Argentina has been recognized by international financial institutions and markets again, which is of great significance."

　　However, the Argentine government claimed at the time that this was only a preventive plan to soothe investors’ emotions. But just two months later, macri was forced to admit that $50 billion was not enough to alleviate the demand, so he got another 7 billion additional loan from the IMF and promised to pay off about 90% of the total loan amount before the Argentine presidential election at the end of 2019.

　　On April 15th this year, after receiving the installment payment of $9.6 billion, macri bought pesos instead of building foreign exchange reserves or paying off debts. — Keep the exchange rate of Argentine currency stable, thus increasing his chances of re-election.

　　This scene is very similar to that in October 2001, when Argentina borrowed $8 billion from the IMF about 60 days before its debt default, most of which was used to buy pesos sold by foreign investors. After that, the price of Argentine government public bonds continued to fall, and the overnight lending rate of banks soared to the range of 250% ~ 300%.

　　Hector R. Torres, a senior researcher at the Center for International Governance Innovation, explained that investors’ mood is also extremely uneasy. He said: "If Argentina cannot pay off all its creditors after 2020, the IMF with priority creditor status will be paid first, and private investors may be forced to restructure their creditor’s rights, thus losing money."

　　"The more debt Argentina owes to privileged creditors like the IMF, the more difficult it will be to persuade non-privileged private investors to extend their debts and continue to provide financing for the country after 2020," he added.

　　The IMF failed to prescribe the right medicine

　　Yue Yunxia told the First Financial Reporter that the IMF’s original intention to help Argentina was good, but it prescribed the wrong prescription.

　　She introduced: "The IMF asked Argentina to carry out some market-oriented and liberalized reforms, so Argentina implemented exchange rate consolidation. Before Christina’s government, Argentina adopted a multiple exchange rate system. After the macri administration took office, it carried out the reform of exchange rate integration, that is, the exchange rate resumed the floating exchange rate according to the market-oriented idea. "

　　"Under such a circumstance, the exchange rate that belongs to market fluctuation actually provides opportunities for international capital to attack the peso," Yue Yunxia explained the consequences. "So Argentina had a currency crisis last year, and the exchange rate depreciation this year is also very serious, and the exchange rate depreciation has also increased Argentina’s economic difficulties and economic risks."

　　In addition, in exchange for the IMF’s assistance, the current Argentine government stated that according to the requirements of the agreement, Argentina will expand the pace of deficit reduction, and reduce the target of fiscal deficit as a proportion of gross domestic product (GDP) from 2.2% to 1.3% in 2019, and plan to achieve fiscal balance in 2020 and fiscal surplus in 2021.

　　Yue Yunxia said that the reform plan that the IMF is most used to proposing is to implement austerity policies. However, she does not think that the IMF is prescribing the right medicine: "If Argentina is facing a liquidity crisis, then the IMF may be able to tide over the difficult period by providing Argentina with more time and trading time for space. However, in the economic downturn, the austerity policy is not conducive to economic recovery, nor can it enable Argentina to solve the fundamental problem of debt and make it solvent. "

　　Recently, Alberto Fernandez, the Argentine opposition presidential candidate who won the primary election with 47% of the votes, said that it is difficult for Argentina to repay the IMF loan at present, and he will renegotiate the repayment with the IMF after his election.

　　In this regard, Yue Yunxia believes: "If the IMF can negotiate debt restructuring with Argentina at the negotiating table, at least one problem can be solved for Argentina, that is, it will not have a debt collapse for the time being."

　　Deja vu history

　　Yue Yunxia told the First Financial Reporter that this economic crisis in Argentina is very similar to the previous ones, and it is a problem of solvency, which is basically solved by restoring growth and improving solvency in Argentina.

　　However, during the previous economic crises in Argentina in 1998 and 2002, the IMF also pursued the wrong policies. In fact, in the 60 years since Argentina first borrowed from the IMF in 1958, the two countries have signed more than 20 agreements, most of which ended in failure. What keeps repeating in Argentina’s economic history is that after the implementation of the austerity policy under the guidance of the IMF, the country has symptoms such as devaluation of peso, rising public debt and instability of financial market.

　　Take Argentina’s economic crisis in 1995 as an example. At that time, President Carlos Sal Menem listened to the IMF’s advice and took measures such as raising taxes and interest rates, reducing the deficit of government budget and expenditure, privatizing state-owned enterprises and canceling import control. Joseph E. Stiglitz, winner of the 2001 Nobel Prize in Economics, pointed out that this is the IMF’s adherence to the double standards under the Washington Consensus, ignoring the local social, political and economic environment.

　　But why is Argentina "obedient" to the IMF? Economists concluded that this is because the international market regards the relationship between Argentina and the IMF as an indicator of whether Argentina’s economy is healthy. The former’s failure to comply with the IMF’s policies may cause opposition from investors, so how the IMF’s suggestions are no longer important, and "pleasing the market" has become the main purpose. On the other hand, the IMF was forced to build a plan to cater to market myths, and the problems were hard to return.

　　As Gilmer Nelson, former Secretary of State for Finance of the Ministry of Economy and Production of Argentina, once explained, he said: "About two years before the collapse of the free exchange mechanism in December 2001, the IMF gradually realized that the free exchange mechanism would eventually collapse due to the different fiscal policies adopted by successive Argentine governments. However, for political reasons, the IMF still supports the Argentine government’s unrealistic approach, so as not to end up in a freely convertible mechanism ’ Murderer ’ The reputation. " (elegant)