The Monetary Fund released this Thursday the staff report on the review of the program it carries out in Argentina. The agency has authorized the country to lend US$ 44,000 million (1,000% of its quota) to cover the expiry of the credit it had granted to the government of Mauricio Macri (US$ 54,000 million) in 2018. This agreement (Extended Facilities Program ) implies that each quarter there are reviews and a payment is released. This time was the third time and about 6,000 million dollars came in.
The report contains words of support for the minister’s management. “All the goals at the end of September have been achieved.” “The policies are starting to pay off.” “Inflation is moderating.” “The second revision of the agreement canceled the agreement and the debt restructuring with the Paris Club.”
It also ratifies the objectives that Martín Guzmán signed at the time and the commitment of the Economy to maintain the course of orthodox politics.
In a classic, the agency warns of the macroeconomic imbalances afflicting the country (“conditions continue to be fragile”) and states that the road to lowering the inflation rate is none other than lowering the fiscal deficit, raising the rate of interest and cool down the economy.
For the IMF, the result of this recipe is nothing more than saving dollars and increasing the country’s repayment capacity, first with the agency and possibly in the future with private bondholders. According to the IMF, Argentina would regain access to international debt markets only in 2025 (one year before the next World Cup).
On page 13 of the report, the IMF says the key to the plan’s success will be “improving the target of energy subsidies.” And continue with the next detail. “High-income residential users, who account for 25% of the total, and commercial users, saw a cumulative 60% reduction between October and November in gas and electricity subsidies. Subsidies to this segment of residential and commercial households will be completely eliminated in February 2023.
The IMF anticipates the adjustments to come. “In February 2023, the agreements with the electricity distributors of the metropolitan region will be reviewed, as well as for the elimination of the arrears with the state operator Cammesa. All these efforts are expected to reduce subsidies by about 0.5 percentage points of GDP, and according to staff estimates, the cost of tariff replacement for businesses would rise from 30% in September 2022 to around 60% by the end of 2023 ”.
The IMF pretends to be distracted by the consequence of using the instrument used by the government to increase the liquidation of foreign exchange without devaluing and thus achieve the objectives of reserves, fiscal and monetary financing: paying an extra dollar to soybeans ($ 230 ) and at the same time charging a cheaper change to those who access the Mulc ($ 174) so as not to get fired up. That debt is financed by the Central Bank and the Treasury has issued a non-transferable note in return.
“It is still essential to protect the BCRA budget. The stock of central bank securities (debt) reached 12% of GDP at the end of November, an all-time high, generating costs that are expected to exceed 4% of GDP in 2022”, says the IMF on the Leliqs ball, passes and letters non-transferable.
IMF ignores higher soybean dollar spending “above the line” which, according to estimates by consulting firm ACM, would be about $4,000 million in cost for soybean dollar 1 and soybean 2 .
The agency requested VAR because of a formal tradition established in its regulations: it penalizes economies that resort to the use of multiple exchange rates to improve exchange rate competitiveness. It is a holdover from the times of John Maynard Keynes, one of the architects of the post-war IMF, in which a rule was created to once again avoid speculative behavior which had led countries to manipulate their currencies, creating distortions and reproaches which resulted in a world War. “These measures add distortions and create vulnerabilities that can be counterproductive,” the IMF says about the soybean dollar on page 17 of its staff report.
Source: Clarin
