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The Government has 4,300 million dollars in its sights | Negotiating with the IMF: Tension, but Agree

Before the March maturities, impossible to face with the level of reserves that will exist at that time, the Government hopes to have the agreement closed with the International Monetary Fund. It does not contemplate asking for a postponement of payments or entering into default. The arrangement has to be in the summer. The point that generates more expectations in the negotiation for the economic cabinet is the reimbursement of 4.3 billion dollars that the country will have paid to the organization until then. These are the SDRs that the IMF itself had sent to Argentina last August for its international capitalization due to the pandemic. The signing of the agreement would activate the return of those resources, official sources transmit, which will be important to give continuity to the economic recovery this year.

The Extended Facilities Agreement, for ten years, does not pose prior demands for devaluation or structural reforms such as labor or retirement. It also supports the Government’s view that inflation is multi-causal and price agreements are required to anchor expectations, as well as the maintenance of exchange regulations and the movement of capital. These are substantial differences with respect to the position taken by the IMF when it agreed to give Mauricio Macri 45 billion dollars in a single signature. Especially the care to avoid the flight of currency, which in that case tolerated without saying a word while the financial speculators took them away until they left nothing.

This is where the coincidences that the Government considers positive after two years of discussions with the Monetary Fund go. The fact that so much time has passed and important differences persist, as Martín Guzmán acknowledged this week, shows, on the one hand, the magnitude of the problem that Juntos por el Cambio left as a legacy, as well as the difficulties that arise when seeking to defend the national interest . But it is also evident that the initial expectation of forming a critical mass with figures such as Pope Francis, Nobel laureates such as Joseph Stiglitiz and international support from different governments, plus the new orientation of the IMF with Kristalina Georgieva, were not enough to balance the balance before the power that the United States represents and its geopolitical interests.

David Lipton, current key advisor to the US Treasury Department, is the same one who played a leading role in delivering political credit to Macri to try for his reelection. He is responsible for his country’s rejection of the recent self-criticism made by the IMF for how it granted that loan, which incriminated it, and for the inflexibility regarding the fiscal goals that Argentina should meet in the coming years within the framework of a new agreement with the agency.

The United States has veto power in the Monetary Fund and has been a stumbling block for other objectives set by the Government, such as the elimination of interest surcharges that imply a surcharge of 1 billion dollars a year. Argentina obtained a declaration from the G20 in favor of reviewing these extra payments, but the initiative did not prosper within the Fund due to the brake imposed by the United States. In other words, the country that ordered to give Macri 45 billion dollars, far exceeding what Argentina could take as IMF debt, is now reluctant to remove that penalty in the new arrangement.

The differences regarding the fiscal issue, with demands by the Fund for an adjustment of public spending that the Government assured that it is not willing to validate, will seek to be saved by means of an increase in financing from the Treasury in the local capital market.

“In 2021 the fiscal deficit was covered 65 percent with contributions from the Central Bank and 35 percent with the market”, details in this regard the latest report from the Development Research Foundation (FIDE), led by the head of the AFIP, Mercedes Marcó del Pont. “Although financing with the market is not in itself a virtuous source of funding for the public sector, what happens with it is relevant in the framework of the debate on the agreement with the IMF,” he adds. Last year, on the other hand, the primary fiscal deficit was lower than projected. “It was around 2.9 points of GDP,” anticipates FIDE, in part due to the contribution of the SDR, when the goal established in the 2021 Budget was 4.3 percent. In 2020 the deficit had been 6.4 percent.

The Government exposes it as a sign that it is possible to reduce the deficit with income growth, as a result of increased economic activity. The economic cabinet raises alternatives to the Fund and while recognizing that differences persist and are important, the political decision will be to strain as far as possible and finally agree. Guzmán accepted in the presentation before the governors that the maximum that can be aspired to at this time is “a good agreement in relative terms, which allows taking a step forward to continue on the path of recovery and have more time to resolve the serious debt problem ”. “In absolute terms there is no good agreement, because the world does not have options that allow generating a much smoother and more distributed profile in the time of payments,” he completed.

The deadlines to close the negotiation are set by the next debt maturities with private creditors and with the body itself. Next Monday the Central Bank will have to disburse 693 million dollars to the first in interest. On January 28 it will be 715 million to the IMF for a capital maturity. In February, payments to the Fund and other organizations totaled 380 million. Finally, in March there are payments for almost 2,900 million dollars to the IMF and 2,100 million dollars to the Paris Club.

“Debt maturities in January and February may be met with reserves from the Central Bank. Not so the commitments that start in March and accumulate for all of 2022. With the IMF it is 18,900 million dollars ”, states the FIDE report. Meeting those payments would be equivalent to allocating 30 percent of gross exports to that end, something impossible to do.

“The Argentine proposal indicates a gradual fiscal consolidation, a less expansionary monetary policy (reduction of the financing of the Central Bank to the Treasury and positive real interest rates), a multi-causal approach to the inflationary problem and an administration of the external sector with validity of the exchange regulations and trade surplus to accumulate reserves. The broad lines look acceptable for all members of the ruling coalition, since they do not imply leaving aside any historical flag on the road, “the document summarizes the official position.

It is the task for the next two months.

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HELEN HERNANDEZ

Helen Hernandez is our best writer. Helen writes about social news and celebrity gossip. She loves watching movies since childhood. Email: Helen@oicanadian.com Phone : +1 281-333-2229

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