For months Beto Marron faced a terrible dilemma: he could pay his rent and rapidly rising utility bills, or he could put enough food on the table for his family of four. He could not afford to do both.

The decision was made for him when he was kicked out of his home on the outskirts of Buenos Aires late last year, forcing his family on to the streets.

“This is sucking the life out of me. When will this nightmare end?” asked the 37-year-old as he rummaged through an overflowing dustbin in a middle-class district of Argentina’s capital.

The same question may haunt President Mauricio Macri, as well as the IMF, which continues to voice its full-throated support for him after its record-breaking $56.3bn Argentine bailout in the thick of a currency crisis last year.

Since then, an abrupt jump in inflation has unleashed an alarming rise in poverty that is far greater than officials and markets had expected. This is threatening the re-election prospects of Mr Macri, who once perkily assured voters on the campaign trail that extinguishing inflation would be “easy”.

It is also raising questions about the IMF’s innovative austerity programme in Argentina, which has put unprecedented emphasis on “protecting society’s most vulnerable”, and what it could mean for future programmes in other struggling emerging markets such as Ecuador.

Recommended American companies count cost of Argentina inflation

“We’re very conscious, and so are the [Argentine] authorities, that an increase in poverty would pose serious challenges to achieving the objectives of the programme,” says Nigel Chalk, deputy director of the IMF’s western hemisphere department.

Inflation, now running at more than 50 per cent annually, played a key role in pushing the poverty level up to 32 per cent of the population by the end of 2018. That is about the same level as when Mr Macri took power in 2015. Although it had fallen to 25.7 per cent by mid-2017, it shot up again last year thanks to the currency crisis. In response this month, the government expanded a controversial programme of price controls to 60 “essential” goods, mostly food, in order to soften the impact of price rises for consumers.

The IMF’s programme in Argentina is its first to explicitly include measures that provide a buffer for social spending by allowing the country to exceed the fiscal deficit targets agreed with the fund in order to spend more on social assistance.

Indeed, the IMF’s third review of its programme with Argentina published on Friday confirmed that more of these measures will be included, while the cap on social spending will be increased from 0.2 to 0.3 per cent of gross domestic product.

But spiralling poverty could yet prompt what Mr Chalk calls “a recalibration of social spending to provide more space for the government to act to protect the poor.”

Poor and homeless people eat near the Casa Rosada government palace in Buenos Aires © AFP

The risk, officials recognise, is that if the government fails to cut the deficit enough because of extra social spending, markets could grow anxious that Argentina’s fiscal adjustment is not happening as fast as it believes is necessary. That could force Argentina to seek more foreign debt to cover the fiscal deficit than originally expected — to a point where its debt burden could become unsustainable.

“So far, markets have been fairly forgiving [since the peso crisis last year]. They understand the trade-offs. It would be tragic — and more than a little ironic — if Cristina made a comeback because the market was demanding too harsh an adjustment,” says one investor, referring to former president Cristina Fernández de Kirchner.

It may not be all bad. Despite concerns about what would happen with the IMF programme in the event of a victory for Ms Fernández, who is widely expected to run in the elections, her radical former economy minister Axel Kicillof has met secretly with IMF officials recently and assured them that a Fernández government would continue with the programme.

Such concerns are far from the minds of many Argentines, given that they are living in the second-most miserable country in the world, according to Steve Hanke, an economist at the Johns Hopkins University who publishes an annual “misery index”, which measures unemployment, inflation and interest rates.

Argentina’s poor performance in the ranking of 95 countries, which is only topped by crisis-wracked Venezuela, is a direct result of the inflation caused by last year’s currency crisis, said Mr Hanke.

In their defence, officials point out that poverty statistics do not reflect qualitative advances such as improving access to jobs by making social programmes more efficient; new drains for 2.5m people; more schools for children; paving roads in slums; lower homicide rates; and fighting against drug-trafficking.

“Sure, the government has done a few things that it maybe doesn’t get enough credit for,” admits Paz Marcano, who cooks at an overcrowded soup kitchen in Buenos Aires. “But when you can’t afford to feed your own children properly, you could be forgiven for forgetting.”

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