Argentina, challenging IMF, projects low inflation

AP News
Posted: Sep 20, 2012 2:24 PM
Argentina, challenging IMF, projects low inflation

BUENOS AIRES, Argentina (AP) — Argentina's government is counting on a rosy 2013, releasing a budget based on annual inflation of just 11 percent and solid economic growth of 4.4 percent.

The numbers represent a defiant attitude toward the International Monetary Fund, which this week gave Argentina just 90 more days to fix its widely discredited inflation and GDP statistics or face unspecified sanctions. Private analysts say the government's numbers underestimate actual price increases by two-thirds, and predict next year's inflation will be as much as 30 percent.

Economy Minister Hernan Lorenzino had nothing but good news for Congress Thursday as he presented the $134 billion budget, which also assumes a positive trade balance of $13.3 billion, enough, he said, to enable continued government spending and keep Argentina growing in an ever-more-volatile world.

The budget also assumes that the Argentine peso will decline just 9 percent in value against the dollar, from 4.69 today to an average of 5.10 next year. That would be the official rate, but many prices in the Argentine economy are now based on the black-market rate, which has already slipped to about 6.30 per dollar.

Argentina is the only leading world economy and IMF member whose numbers have been rejected by the Washington-based agency as unreliable. The IMF's executive board said Tuesday that it laments the absence of progress in correcting the numbers and remains concerned that Argentina is not complying with its terms of IMF membership.

Moody's Investors Service downgraded its Argentina outlook from stable to negative on Monday, saying risky economic policies, a lack of confidence in official statistics, the uncompensated seizure of Grupo Repsol's controlling shares in the national YPF oil company and Argentina's continuing refusal to pay off all its foreign debts have brought the once-booming economy to a standstill.

But Lorenzino told lawmakers that Argentina no longer depends on international approval to keep its economy strong. Without naming Moody's, he criticized the downgrade, saying the ratings agency's "analysis is based exclusively on variables that aren't objective."