Martín Guzmán and Cristina Kirchner, a relationship that conditioned the IMF program
Spring meetings of the Monetary Fund and World Bank will begin tomorrow. On Tuesday, the agency’s chief economist, Pierre-Olivier Gourinchas, will present the traditional World Economic Outlook report. Growth and inflation projections will be released for the world and Argentina in 2022 and 2023.
Ang war in ukraine and the almost certain increase of half a point in the interest rate of Federal Reserve in May — the most important in 20 years—, constitutes a large part of the challenge of the new scenario to predict. The aggression or the current magnitude of the US inflation outlook was not listed in the last update of the IMF report in January this year. Much less when the staff of the Fund and the Argentine team sat down to define the framework to develop Extended Facility Agreement that they reached two last month. Argentina has agreed a loan of US $ 44,000 million to repay agency payments in 2022-2024.
In this context Martin Guzman He will arrive in the United States on Wednesday (his agenda is still being determined until yesterday) to participate in meetings attended by all the world’s economic ministers and by the presidents of central banks. Gustavo Béliz will also attend.
Guzmán will show progress on the goals set for the second quarter (which will trigger a disbursement of US $ 4,169 million in June), that is, a major deficit of $ 566,800 million, an accumulation of reserves of US $ 4,100 million and a ceiling for money financing the deficit.
Market discounts that the government will meet these goals by the end of June. There will be disbursement.
But the organization’s staff will raise risks and doubts in the future. According to sources familiar with the negotiations and what is circulating in Washington at this time about Argentina’s program, there are concerns at the IMF about meeting fiscal and reserve objectives by the end of the year. There will also be questions about insiders within the government and why the ruling party itself does not appear publicly ‘selling’ the program to the IMF.
Doubts about the fulfillment of financial objectives are primarily underlying the increase in the value of the energy account. And on the subject of reserves, basically, because of the organism they saw that the Central Bank did not keep the dollars despite the increase in liquidation of the field.
In recent days, the monetary authority, in conjunction with the rate increase of 250 basis, has sharply reduced the exchange rate.
It is not uncommon for an IMF program to need to recalibrate. Many variables can change and as John Keynes (intellectual father of the IMF) said, if circumstances change, opinions will be the same.
From the organization so far they have emphatically taught that “re-calibration does not mean re-negotiation”, says a report by Equilibra consultancy, by Diego Bossio and Martín Rapetti.
The economic team and staff will agree that inflation will be higher, growth will be lower and the savings from subsidies may not be 0.6% of GDP as the program expects, but instead there will actually be of increase as a result of the jump in energy prices around the world. This is part of the respite provided for the supplement to the agreement on March 23rd.
However, “the estimates they oversee in Washington would suggest that the war did not compromise the goal of accumulating US $ 5.8 billion in reserves, but it did compromise the goal of reducing the primary deficit,” Equilibra said. “Does this indicate that the fiscal objective is loose? It will be a matter of negotiation. The IMF will be inclined to keep it, while the government will push for a respite.
For the Broda Study, “the IMF urged the Argentine authorities to re-calibrate the policies as necessary to ensure compliance with the program objectives. In this interpretation, only the rules are recalibrated, but the objectives are not affected. But there is likely to be a re -calibration of policies as well as goals.
Negotiations between the Government and the Fund will be almost permanent in the coming months. Each quarter, the IMF will review compliance with objectives and possible deviations.
Possible program changes are discussed in the changes. There are 10 first. This week’s talks in Washington will be a preview of that audit. Any revision must be approved by the Board.
Another of the questions that will emerge on Guzmán’s trip is about internal government and the criticism he faces from Vice President Cristina Kirchner. In Kirchnerism, they believe that if Argentina follows the IMF program, the chances of the ruling party in the 2023 presidential elections will not only be more compromised, but also that the government’s path towards it will not be free of obstacles. . This week, Guzmán called for hearings to raise electricity and gas bills as he promised the Fund. La Cámpora opposed this.
The Fund will inquire about this and would like to know why the Government is not communicating the plan more specifically. Guzmán did not make any presentation or press conference after its approval.