IMF reprimands Argentina for inaccurate economic data
WASHINGTON (Reuters) - The International Monetary Fund issued a "declaration of censure" against Argentina on Friday in its harshest reprimand to date over the quality of its inflation and GDP growth data, and gave the country until September 29 to take action.
The IMF's executive board said Argentina had failed to make sufficient progress in improving the accuracy of the data. It called on the government to fix its data problems "without any further delay."
"As a result, the fund has issued a declaration of censure against Argentina in connection with its breach of obligation to the fund," the IMF said in a statement.
The IMF board said it will review progress in November, when it could impose sanctions on Argentina, barring one of Latin American's largest economies from voting on IMF policies and accessing financing.
The IMF left the door open to changes, saying it stood ready to continue discussions with Argentina on improving the data, and more generally, to strengthen relations with the country.
Argentina's Economy Ministry late on Friday asked for an extraordinary meeting of the IMF board to discuss the multinational lender's policy toward the South American country.
The ministry issued a statement noting that long before the IMF sought to hold Argentina up as a bad example of economic data reporting, it hailed the country as a model of IMF policies in the 1990s. Those policies, the statement said, resulted in Argentina's 2002 debt default and economic meltdown.
It called the censure declaration "not only a new IMF error but a clear example of unequal treatment and the double standard with which this organization treats certain members."
"This is the same fund that showed itself to be complacent about the inexact data and failed policies that led to the global financial crisis," the statement added.
SANCTIONS MAY FOLLOW
Analysts have accused the government of underreporting inflation since early 2007 for political gain and to reduce payments on its inflation-indexed debt.
"The fund has, admittedly, been quite slow and overly hesitant in pushing forward in a decisive way," said Alberto Ramos, Latin America economist at Goldman Sachs.
"Light sanctions may follow the scheduled November board review, but given the strained relationship between the IMF and the authorities, this may not have major direct implications for Argentina," he added.
Argentina has cut its financing ties with the IMF and relations between the two have been steadily deteriorating since the country's 2001-02 debt crisis, which many ordinary Argentines blame on IMF policies.
IMF Managing Director Christine Lagarde warned Argentina in September it could be handed a "red card" unless it addressed problems with the data.
Previous IMF chiefs, including Rodrigo Rato and Dominique Strauss-Kahn, unsuccessfully tried to mend ties with Argentina, and other senior fund officials have preferred to stay away from commenting on the country to avoid escalating tensions.
Earlier this week the IMF also discussed Argentina's refusal to participate in the fund's annual economic assessment for the past five years.
The only country the IMF has forced to leave its ranks was the former Czechoslovakia, which occurred in 1954. Countries like Somalia and Zimbabwe have been sanctioned by the IMF, but mainly because of a failure to repay the fund.
"This is a very serious step by the IMF," said Riordan Roett, director of Western Hemisphere Studies at Johns Hopkins' Paul H. Nitze School of Advanced International Studies in Washington.
"The situation in Argentina is deteriorating very quickly ... and there is no sign that the government has any interest or willingness to even try to address some of the basic concerns of the fund. I think the board was absolutely right, it was unanimous that this is the time to call the Argentine government to accounting," Roett added.