The technical staff of the International Monetary Fund (IMF) approved the first review of the goals of the agreement signed at the beginning of the year with the Government, which enables the country to receive in the coming weeks a new disbursement equivalent to some US$4.03 billionas provided for in the extended facilities program sealed at 30 months.
“All the quantitative goals of the program were met in the first quarter of 2022”, they highlighted from the Government, something that was taken for granted since in this first stage it was very lax objectives.
The “good news”, due to the much-needed injection of foreign currency, was combined with another not so positive one.
In the statement through which both parties report the novelty, it is also ratified that the annual objectives established in the approval of the understanding will “remain unchanged”.
The bet of the Ministry of Economy was that some of them be put under review right now, given the impact that the war in Ukraine had on the markets and the prices of the commoditties. But despite the fact that this incidence is mentioned in the statement, it does not seem to have been enough to make some annual goals more flexible, as was the official intention.
It was only enough for it to be analyzed the possible “modification of the interannual quarterly goals of the primary fiscal deficit and the accumulation of reserves, keeping the annual objectives of the program unchanged”, clarifies the IMF in the announcement statement.
“Looking forward, decisive policy implementation will be critical to ensuring program goals are met throughout the remainder of 2022 and beyond. This also includes taking measures to mobilize net domestic financing in pesos, improve the transmission of monetary policy, reduce tax evasion, strengthen the AML/CFT framework, and encourage investment in strategic sectors,” the statement said.
“The review focused on evaluating the performance of the program since the approval of the agreement, analyzing the effects of the impact of the war in Ukraine on the economy of Argentina and identifying policies to address such effects,” the statement added.
But then he admits thatthe technical staff of the IMF and the Argentine authorities have agreed that the annual objectives established in the approval of the agreement will be maintained, specifically those related to the primary fiscal deficit, monetary financing and net international reserves”, he details, and it is clarified that he does so with the understanding that such an approach “provides an anchor for economic stability and growth in times of uncertainty”, they pointed out.
From the Government they explained that the new disbursement (of 3,000 million in Special Drawing Rights -SDR’s-, that is, the IMF currency) will arrive in the country once the board of directors of the agency formally approves what has already been resolved by the technical teams. who in recent weeks were in charge of reviewing the “Argentine case.” And they stressed that they consider this step “fundamental to strengthen stability and support the ongoing economic recovery.”
The IMF, for its part, recalled that the review of the goals was carried out by a team headed by Julie Kozack, deputy director of the Western Hemisphere Department, and Luis Cubeddu, head of the mission for Argentina, and consisted of “meetings face-to-face and virtual meetings with the Argentine authorities to discuss policies” to which he thanks “for the open and constructive discussions”.
Also, recognizes the Government “its firm commitment to implement the program, whose objective is to help Argentina strengthen economic stability, address the persistent and high inflation and continue to address its historical challenges”, while announcing that “progress is being made on the structural agenda and on the reforms that promote growth in line with the commitments of the program, including on the energy front”.
The IMF in its statement admits “the external shock associated with the war in Ukraine” but considers that it will have “a limited impact on growth and the balance of payments of Argentina this year”, although it recognizes that “Argentina’s fiscal position also is being affected by the shock of commodity prices due to an increase in energy subsidies and an adequate expansion of social support directed at low-income households”.
He further notes that – as in most other countries – rising global commodity prices have already led to higher inflation.
But it reports that they observed in the Argentine authorities the commitment to “implement policies that allow achieving the annual objectives of the program of primary fiscal deficit, monetary financing and accumulation of reserves”, although it must be “reorient public spending to achieve the primary fiscal deficit target of 2.5 percent of GDP by 2022, while reducing monetary financing to 1 percent of GDP, as planned.”
It also details that they have committed to “continue applying the monetary and exchange policy framework to achieve positive real policy interest rates, ensure exchange rate competitiveness, and support reserve accumulation of US$5.8 billion for the full year.”
