The Ministry of Economy reported that it has reached an agreement with the IMF review the Extended Facilities agreement signed in March. This is the stock lens edit, objective that the Government deemed unattainable due to the continuous loss of foreign currency by the Central Bank in a context of severe drought, lower activity and internal tensions due to the progress of the program in an election year.
“There is an understanding and today we would know the press release from the staff, would allow the disbursement and would modify the quarterly and annual reserve target”, pointed out by Economy. So in the next few hours the press release of the technical agreement with the personnel (staff level agreement) for the approval of the fourth quarter of 2022 and the modifications would be published, but has yet to be validate the list, a necessary step to release an outlay of US$ 5.300 million.
The agreement was reached after more than 140 hours of zooming between Sergio Massa’s team and the Fund’s technicians, two face-to-face with Kristalina Georgieva and three with her right hand, Gita Gopinath. Negotiations began in November when Massa presented Indonesia with a document outlining the costs of the “war” for its impact on energy subsidies, a debate that continued in February in India.
Fund staff had warned in December that the drought could reduce exports and entry of dollars, overheating inflation and “jeopardizing” the deal. For the government, the outlook was worse than expected. Net reserves were expected to reach $7.7 billion at the end of March and $12.5 billion in 2023. But the central bank lost $1.4 billion on the year and would have a remainder of $2.2 billion dollars, according to Ecolatina.
The government has added the impact of the drought on foreign exchange earnings to the negotiating table. According to his calculations, it will be 9.6 billion dollars, an optimistic figure compared to the estimates of the Rosario Stock Exchange, which expects the loss of 14.2 billion dollars due to lower exports of cereals and a total of almost 20 billion dollars, including the various connections that depend on agriculture, transport and financing.
The hit to the sector with the largest currency-generating capacity heightens tensions over the direction of the economy. In addition to complicating the objectives with the Fund, it puts more pressure on the rate of appreciation of the official dollar to avoid a sudden devaluation, affects the level of activity and tightens restrictions on imports, which affects inflation expectations and the continuity of the price agreements with companies.
Massa has called for climate contingencies, including bird flu, to be contemplated amid Kirchnerism’s demands to revise the accord. During an act in Río Negro, Cristina called this Friday to seek consensus to change the program. “The conditions under which the agreement with the IMF was signed will have to be reviewed,” she said, adding: “Review, not to avoid paying, but to be able to grow,” in line with Máximo Kirchner’s previous statements .
The agreement to refinance the $44,000 million debt contracted in 2018 includes fiscal, issuance and reserve targets. In official dispatches they ensure that the IMF “would allow monetary measures”. The government has just finalized a debt swap with the banks to kick-start paying $4.3 trillion by 2024 and 2025. And though it has promised to cut monetary assistance to the Treasury, the central bank has issued to buy bonds and Leliq.
In a recent report, the BCRA acknowledged that in February “among the factors that positively contributed to the monthly change in the monetary base were the BCRA’s secondary market purchases of government bonds, which the BCRA continued to carry out with the aim of limiting the excessive volatility of the public debt securities market, and the effect of the interests of the BCRA’s monetary regulation instruments”.
In the government they believe that the monetary issue is one of the main causes of inflation, which in February will exceed 100% on an annual basis. But they attribute it to the management of Martín Guzmán and are now betting on financing themselves with more debt in pesos. “The idea is that the damage that drought can cause us is not financed by emission but by financing, part of the inflation is due to the volume of emission due to lack of financing in 2020 and 2021,” they stressed in Economy.
NS
Source: Clarin
