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Argentina's new IMF deal may come during shock therapy

A new IMF deal is key for the May 1 government to ease capital controls, return to international markets and revive the struggling economy.

The current $44 billion IMF program, the largest ever for the Washington-based bank, could be replaced with a new deal that includes additional resources to repay IMF dues and ease capital controls. Those controls have made it difficult for companies and individuals to take dollars out of the country, hampering investment amid a deepening recession.

While the IMF has given Argentina a positive assessment of its economic trajectory, it has stressed the need for a more flexible exchange rate. The peso’s official exchange rate lags far behind monthly inflation due to government currency controls, which economists say keep the Argentine currency overvalued. To bridge the widening gap between the official and parallel exchange rates, Argentine officials have begun intervening in foreign exchange markets, often to the dismay of the IMF.

Cover image is an illustration. Cover image source: Getty Images

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