Why in the News?

Argentina faces one of the world’s highest inflation rates and a decade-long economic stagnation.

The International Monetary Fund’s (IMF) earlier decision to release $4.7 billion from a $57 billion bailout package to Argentina, despite missed targets, raised eyebrows.

IMF’s Controversial Decision:

The IMF dispersed $4.7 billion, including overdue and advanced payments, to bolster President Milei’s nascent government.
This move contradicted IMF guidelines requiring adherence to economic conditions, signaling geopolitical influence and strategic support.

Persistent fiscal deficits and chronic inflation have plagued Argentina, with historical inflation averaging 190% from 1944 to 2023.
The government defaulted on sovereign debt nine times, exacerbating economic instability.
- Since 2009, fiscal deficits persisted, reaching 4.4% of GDP in 2023, fueled by overspending and reliance on the inflation tax.

Milei’s administration targets fiscal reform to eliminate large deficits, contrasting with past failed attempts like the Austral Plan.
- Alfonsín launched the Austral Plan, an austerity program that implemented a new currency (the austral), wage and price controls, and currency devaluations.

The IMF is an international organization (190 member countries) that provides loans, technical assistance, and policy advice to member countries.
Established in 1944 to promote international monetary cooperation, exchange rate stability, balanced economic growth, and poverty reduction.
Hq: Washington, D.C.
An IMF bailout, or an IMF program, is a loan package provided to financially troubled countries.
- Bailout programs have specific terms and conditions that borrowing countries must meet to access the funds.

	Description	Duration	Conditionality
Stand-by Arrangements	Short-term lending programs for countries with temporary balance of payments problems.	1-2 years	Specific macroeconomic policies for stabilization
Extended Fund Facility	Medium-term lending programs to address balance of payments difficulties from structural weaknesses.	Longer-term	Extensive conditionality and significant reforms
Rapid Financing Instrument	Loan program providing quick financing for countries with urgent balance of payments needs.	Flexible	Fewer conditions and shorter application process

PYQ:

[2016] With reference to the International Monetary and Financial Committee (IMFC), consider the following statements:

1. IMFC discusses matters of concern affecting the global economy and advises the International Monetary Fund (IMF) on the direction of its work.

2. The World Bank participates as an observer in IMFC’s meetings.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2