2023-08-25 21:22:42
Sergio Massa and Kristalina Georgieva, surrounded by their respective teams, in their meeting on Wednesday in Washington
The International Monetary Fund published today the report of its technical teams, known as the “Staff Report”, corresponding to the fifth and sixth review of the program it maintains with Argentina. In the document, the IMF considered that since the last review the Argentine economic situation has become “increasingly fragile, with episodes of greater market volatility that more recently reflected political uncertainties.”
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“While the historic drought has resulted in higher-than-expected losses in agricultural production, exports and fiscal revenues, non-agricultural activity has shown resilience, reflecting robust domestic demand, partly as a result of diversions politicians,” he added.
The technicians highlighted that inflation and external pressures intensified while reserves fell “to dangerously low levels due to drought and insufficient policy adjustment.”
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They also expressed that these two causes motivated the “deviations and delays” in the implementation of the policies. And it was highlighted that the three goals established for the end of June “were lost by wide margins”, in relation to the criteria established for the accumulation of net reserves in the Central Bank, the primary fiscal balance and the monetary financing of the fiscal deficit.
Yesterday, following the disbursement of USD 7,500 million approved by the Fund’s board of directors on Wednesday, the managing director of the IMF, Kristalina Georgieva, indicated through a statement that Argentina will need greater efforts to comply with the program, she requested “strong support political” for the current government and the next, while aiming to reduce the fiscal deficit with a focus on reducing subsidies.
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“In order to achieve the agreed primary fiscal deficit of 1.9% of GDP this year, it remains essential to support economic and financial stability. Efforts are focused on tightening spending controls with initial measures aimed at updating energy rates and containing public salaries and pensions, while continuing to protect priority spending on social programs and infrastructure,” Georgieva said.
In this framework, in line with the agency’s requirement, the Government promised in the letter of intent signed by the Minister of Economy, Sergio Massa, and the head of the Central Bank, Miguel Pesce, to channel “prudent” salary agreements. “While we are working to expand our voluntary price agreements (fair prices), consistent with prudent wage agreements that preserve purchasing power while supporting our disinflation targets,” the officials said in the text, adding that “although the framework As monetary and exchange rate policy will be adjusted accordingly to ensure our reserves and inflation targets, limited and temporary interventions in financial currency markets may be necessary.
The possibility of intervening in a “limited” manner, as repeatedly highlighted throughout the entire text of the report, is one of the central issues of understanding with the agency, which enabled the mechanism as long as it does not interfere in the process of accumulation of reserves whose level, it is admitted, is dangerously low.
Regarding the demanding fiscal goal, the Government assured that it remains determined “to maintain fiscal order and achieve the primary deficit target for 2023 of 1.9% of GDP by 2023. The significant reduction in export taxes as a result of The drought is being offset by higher revenues from the recently expanded tax on access to the official dollar for imports, as well as measures to strengthen spending control, while protecting priority spending and infrastructure,” says the letter of intent signed. by officials in charge of the relationship with the agency. In this sense, they specify that the demands expressed by Georgieva will be met. Specifically, it is updating energy rates in line with rising production costs, while improving the progressivity of subsidies. Also through “the containment of the growth of public sector wages; and better targeting of transfers to the provinces and state companies. By 2024 -he added- we have committed to achieving a primary fiscal deficit of 0.9% of GDP.
Massa and Pesce also assured that they will propose that Congress consider a reduction in fiscal spending to achieve a more ambitious consolidation.
Keep reading:
“Allergy to uncertainty”: devaluation, inflation and the campaign paralyze investment and put pressure on the red circle More exchange controls: a Central Bank regulation targets the famous “mash dollar” Pressure continues on the financial dollar and the market expects greater intervention from the Central BankAfter the disbursement, the head of the IMF asked to increase energy rates and contain public salaries and pensions
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