2023-07-03 15:21:54
After making the payment of US$2.7 billion to the International Monetary Fund (IMF), the Government begins a key stage for negotiations with the organization. The truth is that now the details must be defined to close the fifth revision of the agreement and enable the new conditions of the program. This instance, official sources estimate, will last for a week.
On Friday, the Ministry of Economy reported that the June maturities -which had been postponed- were canceled with SDRs (Special Drawing Rights) and freely available yuan from the swap with China.
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Massa’s intense agenda includes a meeting of the economic cabinet led by him, with the participation of the Secretaries of Economic Policy, Gabriel Rubinstein; Finance, Eduardo Setti; of Commerce, Matías Tombolini; of International Financial Economic Affairs, Marco Lavagna; the Chief of Advisors, Leonardo Madcur; the head of Customs, Guillermo Michel; and the Vice President of the Central Bank of the Argentine Republic, Lisandro Cleri.
After the summit, the Minister of Economy appears at the LXII Ordinary Meeting of the MERCOSUR Common Market Council (CMC) in Iguazú, with meetings with his peers from the bloc in the region. Later he leads a work meeting together with the outgoing governor of Misiones, Oscar Herrera Ahuad, the incoming governor, Hugo Passalacqua, and mayors of the province.
How are the negotiations with the IMF to advance in a new agreement
In this context, this week a delegation from the economic team travels to Washington to unlock the technical agreement with the Fund. The Vice Minister of Economy, Gabriel Rubinstein, and the head of Advisors for that portfolio, Leonardo Madcur will be the two officials who will travel to negotiate.
Kristalina Georgieva, Director of the IMF. (Photo: Archyde.com)
“It will be in the first days of the week,” confirmed sources from the Economy before the TN query. In turn, they indicated that the meetings to define the new conditions of the agreement will last regarding a week. It is still unknown when Sergio Massa will join – if he does.
The objective of the officials of the economic team is for the IMF to advance current disbursements to take pressure off the weak reserves of the Central Bank, in addition to reaching an understanding that allows reformulating the guidelines of the current program.
For its part, the body limited itself to giving brief communications on the progress of the negotiations. In a statement, IMF Director of Communications Julie Kozack said: “IMF staff and the Argentine authorities will continue to make progress in their work in the coming days, with the goal of reaching an agreement on the fifth review of the supported program by the Fund”.
“Technical discussions continue on a package of policies to safeguard economic stability in the context of a challenging situation, partly affected by the historic drought. Discussions are focused on strengthening macroeconomic policies to support reserve accumulation and improve fiscal sustainability, while protecting the most vulnerable,” Kozack remarked.
The Government failed to meet the goals with the IMF and seeks to renegotiate new guidelines
Argentina failed to meet any of the three main goals of the agreement: neither the fiscal goal, nor the monetary issue nor the accumulation of reserves. The Government’s main argument is that the impact of the drought was greater than expected and affected all the estimates made.
At the moment, the most committed objective of those agreed with the IMF is the accumulation of net reserves. According to what was signed with the Fund in 2022 and revised this year (following default in the first semester), by the end of June the Central Bank should have added US$4.9 billion.
On Friday, the reserves closed at US$27,933 million -the lowest level in more than seven years- and several payments to the IMF are still pending in the remainder of 2023, in addition to the amortization of a bond for around US$1,000 million in July.
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The annual fiscal deficit target agreed with the IMF was the equivalent of 1.9% of GDP. With data to the first five months of 2023, economists warn that it will no longer be possible to show the number that was committed. According to LCG estimates, spending had a real cut of 7%, but the primary deficit reached 0.7% of GDP until May.
Regarding the pattern of monetary issue, the BCRA has already transferred $670,000 million to the treasury, thus exceeding the goal with the IMF by $300,000 million. This means that it issued 80% more than what was allowed by the agency.
Sergio Massa, Minister of Economy. (Photo: Télam)
It is for this reason that the economic team will mainly try to recalibrate the agreed goals following the extreme drought, which complicated the public accounts and the negotiation with the technical staff prior to the start of the electoral campaign.
In addition, the Argentine delegation wants to ensure that funds are advanced to curb the shortage of reserves and, in addition, to deal with any exchange rate movement that might encourage a devaluation before the elections. The Government wants the IMF to advance US$10.6 billion, but it is discussed whether that will be the amount that the agency will finally enable.
Meanwhile, it also remains to be known what the conditions will be that the Fund will ask the Government to advance in the changes of the originally established goals.
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