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Argentina starts talks with IMF to speed up standby loan

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By Reuters
Argentina starts talks with IMF to speed up standby loan
People walk in Buenos Aires' financial district, Argentina, September 3, 2018. REUTERS/Marcos Brindicci   -   Copyright  MARCOS BRINDICCI(Reuters)

By Hugh Bronstein

BUENOSAIRES (Reuters) – Argentine officials were in Washington on Tuesday for crunch talks with the International Monetary Fund about accelerating cash disbursements under a $50 billion standby deal aimed at shoring up confidence in the country’s ailing finances.

On Monday, the government of Argentine President Mauricio Macri ended the inflation-racked country’s gradual approach to balancing the government’s budget, announcing new taxes on exports and steep spending cuts to eliminate Argentina’s primary fiscal deficit next year.

“We are focused on generating total certainty about Argentina’s financing program next year,” Economy Minister Nicolas Dujovne told local television late on Monday before flying to Washington to meet with the Fund.

He said early cash disbursements from the IMF would allow the government to avoid going to the bond market for financing over the near term. The IMF deal was negotiated earlier this year as pressure mounted on Argentina’s peso currency which got pounded 16 percent lower against the dollar last week alone.

Before Monday’s announcement, Argentina had agreed with the IMF to a primary of fiscal deficit target of 1.3 percent of gross domestic product next year. The new government plan is to eliminate the deficit in 2019 while this year’s deficit target was pared down to 2.6 percent of GDP from 2.7 percent.

Faced with higher U.S. interest rates that siphoned off investors from emerging markets, contagion for a currency crisis in Turkey and a drought that wrecked harvesting of Argentina’s main cash crop, soy, the deficit left the country open to doubts about it’s ability to make next year’s debt payments.

The peso has lost about half its value against the dollar this year and Macri has struggled to get budget cuts approved.

When he tried cutting pension benefits late last year, protesters had to be driven back from Congress with tear gas and water cannon. “We had very ambitious goals, but the country was not ready for them,” Dujovne said before leaving for Washington.

(Additional reporting by Mitra Taj; Editing by Alistair Bell)