In eleven months the government of the ultra-liberal Javier Milei has regained a budgetary balance at the cost of «shock adjustment”, with cuts in public spending.
The Fitch rating agency on Friday raised Argentina’s long-term debt rating by one notch, from CC to CCC, but remains in the speculative category, and does not attach any outlook to this rating. Raising the grade “reflects developments that have improved Fitch’s confidence in the authorities’ ability to make upcoming foreign currency bond repayments without seeking any relief”details the agency in a press release.
“Dollar inflows triggered by a successful tax amnesty have begun to increase international reserves and are expected to continue to do so as they circulate through the financial system, supporting sovereign access to the dollar”adds Fitch. The rating agency notes, however, that “risks, however, weigh on the repayment capacity, (…) given the still uncertain prospects of a transition towards monetary and exchange rate policies likely to ensure a lasting improvement in reserves and a resumption of access to walk”.
“Shock fit”
In eleven months the government of the ultra-liberal Javier Milei has regained a budgetary balance at the cost of “shock adjustment”with cuts in public spending. Collateral victims: purchasing power and economic activity, which plunged Argentina into recession where poverty affected 52% of the population in the first half of the year, according to official figures.
Entering recession under the combined impact of inflation and austerity, the Argentine economy is expected to contract by 3.5% in 2024, according to the IMF, before a recovery estimated at +5% in 2025. In October, inflation continued a deceleration observed for several months, but was still 193% year-on-year. Barely six months after a 10,000 peso note, Argentina has even launched a 20,000 peso note, now the largest denomination in circulation. The Argentina of Javier Milei, a declared ally of American President-elect Donald Trump whose climate skepticism he shares, withdrew its delegation from COP29, which is taking place in Baku (Azerbaijan), on Thursday.
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