The IMF is risking hurting, not helping, Argentina.

The International Monetary Fund (IMF) intervention in Argentina in the years that preceded the country’s 2001 default became the object of various posthumous analyses that raised the question of whether its programme, rather than helping, contributed to pushing the Latin American economy over the edge.

All involved, Argentines in particular, hope that the IMF’s new, record-breaking $57bn bailout programme for the country will be different. As things stand, the odds suggest otherwise. The acceleration of the austerity measures already planned by Buenos Aires is risky: the IMF is imposing a fiscal adjustment of 2.8% in 2019 – something the country will struggle to absorb as it will be emerging from recession and dealing with a potentially slow recovery. Next year is also an election year.

Naturally, the IMF does not express political preferences. Given Argentina’s political past, however, a scenario in which a protectionist government comes back into power will likely be viewed negatively by most in the international community.

This is also a scenario that should not be dismissed. While president Mauricio Macri’s popularity is at its lowest since he won elections in 2015, former Perónist president Cristina Fernández de Kirchner may run next year – despite her alleged involvement in a corruption scandal, which she denies.

What if the austerity imposed by the new IMF programme, which ends two years after the presidential vote, is too much to bear and Argentines decide to replace a reformist, market-friendly leadership with the populism of the past? The country’s long-term economic prospects would look much more uncertain in that case. The chances of the IMF being paid back fully might diminish too.

Because of the IMF’s past in Argentina and because of the size of the bailout, managing director Christine Lagarde’s reputation is on the line as much as Mr Macri’s. Persuading Argentines to continue on the path of reform – rather than making it even harder to accept them – is something that should be high on the IMF board’s minds.

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