ARGENTINA

MICHAEL MUSSA, Senior Fellow, Institute for International Economics, August 5, 2003
CZIKOWSKY: How are the people of Argentina coping? Are consumer goods available and affordable, or are there serious domestic market problems? What are the prospects that the unemployment rate may be reduced?
MUSSA: Unemployment and the poverty rate are up sharply in Argentina since the beginning of 2001 and even more so since the peak of economic activity in mid 1998. Prices of imported goods have risen sharply since the collapse in the value of the peso last year. Prices of most domestic goods are also a good deal higher and have generally gone up more than nonminimal wages. With bounce back from last year’s catastrophe, however, unemployment has started to decline.
CZIKOWSKY: If the International Monetary Fund contributed to the economic difficulties of Argentina, let me then ask: is there something the IMF could have done that would have been helpful?
MUSSA: The IMF does not provide economic assistance. It provides emergency financial assistance to countries facing actual or potential balance of payments difficulties. In this role, the IMF also applies policy conditionality for its assistance. When the Argentine economy was performing very well during most of the 1990s through mid 1998, fiscal policy was too lax and government debt was run up despite receipt of large revenues from privatization. Especially because of Argentina’s history of fiscal problems and its very rigid exchange rate regime, the IMF should have insisted on a more responsible fiscal policy.