2023-08-07 14:55:11
Failure to meet the goals promised in the Extended Facilities Agreement, during the first semester, the discussion with the IMF continued until, last week, a technical understanding was reached with the staff of said organization. To unlock disbursements, It now remains for the understanding to be discussed and approved by the Board of Directors.
Until this happens, there will be no new disbursements.
Insufficient adjustment: the Government failed to meet the fiscal goals of the first semester
Last month the debt maturities were paid using international reserves: SDRs that the Government had deposited in the BCRA and yuan, from the swap with China. As we realize in the Tracking of this edition, this further reduced the already low level of reserves of the Central Bank, whichThey are located in a historic apartment.
Los July maturities, rescheduled at the end of the month, will also imply a set of measures with an impact on gross reserves and/or short-term financial costs, pending approval by the Board of Directors and the corresponding disbursements, which will not take place until the second half of August. That is to say, the payment with the swap with China and the credit agreed with the Latin American Development Bank, better known as CAF, implies continuing to borrow.
Appropriate policies are sought
Given this context, what would have been an adequate economic policy to close an imbalance in the external sector such as the one described? If at the official price there is a lack of supply of dollars and there is excess demand, what should happen to balance said gap is to increase the value of the currency, up to a level at which dollars begin to enter or, at least, stop leaving.
New agreement with the IMF: “Argentina is trapped with no way out,” said an expert
However, given the historical sensitivity of our economy’s prices to the exchange rate, carrying out an adjustment in the value of the dollar without a consistent economic plan that anchors expectations, would have a certain risk of accelerating the already high level
of inflation.
We might describe the alternative that was found as “fiscal devaluation”; that is, on the one hand, introduce taxes and fiscal costs to make the purchase of foreign currency for goods, services and savings more expensive and, on the other hand, encourage the entry of foreign currency through the already
known mechanism of the agricultural dollar, this time, at a price of $340. This policy -whose indirect impact on the external front is limited vis-à-vis a real devaluation- would also seek to improve collection and, in this way, be able to maintain the fiscal deficit target originally agreed at 1.9% of GDP .
The Government assumes a debt with Qatar to pay the IMF without using reserves
It would seem to be increasingly clear that neither party intends to assume the responsibility for a foreign exchange event occurring before or during the electoral process, and that a bridge is only sought until a new government has the capacity and political will to face the reforms that the economy requires.
Certainly this type of “patch” measures are not innocuous, not only in terms of long-term economic efficiency -which would already be too much to ask-, but also has concrete costs that will have to be paid sooner rather than later.
Instead of bearing the costs of making the necessary correctionsthat facilitate the task of the new government -be it of whatever sign-, speed up the recovery and mitigate the cost for society, the sick person continues to resist taking the bitter medicine.
* partner in charge of Services and Economy of PwC Argentina
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