The International Monetary Fund announced on Monday that fit made the reserve accumulation target established in the original program with Argentina more flexible, a measure that will give the Government breathing room in an election year that saw the impossibility of achieving the initial objective due to drought and lower activity. Also, he asked accelerate the reduction of energy subsidies, especially the wealthier sectors.
The Fund’s technicians also affirmed that the objectives for the last quarter of the year have been achieved and have given the go-ahead for the disbursement of some US$5.3 billion (SDR 4 billion, the currency of the IMF), something that has yet to be approved by the board.
In a statement released in Washington, the IMF highlighted drought as the primary reason for revising the program’s reserve targets.
“Although stronger macroeconomic policies and efforts to ensure better reserve coverage and reverse recent exchange rate losses are expected, A change to the net international reserve accumulation target for 2023 is required.”
“This will partially meet the increasingly severe impact of the drought, taking into account the countervailing effects of lower energy import prices and agreed policy measures. impact of drought.”
The underlying statement don’t talk about numbersbut from Economy they indicated that a new reserve accumulation limit had been established for March, June, September and December, reducing more than 3,000 million dollars to be accumulated in March and nearly 2 billion by the end of 2023.
Regarding the fiscal deficit, the IMF said that “the authorities are committed to achieving the primary fiscal deficit of 1.9% of GDP in 2023 through continued spending controls, better targeting of energy subsidies and welfare and better prioritization of capital spending, while protecting prioritized social and infrastructure spending.
And he stressed the need to reduce energy subsidies. “To meet the deficit reduction targets and enhance the progressiveness of energy subsidies, the authorities intend to continue implementing the agreed segmentation scheme, eliminating subsidies for higher-income residential users.”
The Fund assessed the performances of the last quarter of the year and stated that “all were satisfied” and that “prudent macroeconomic management in the second half of 2022 supported stability and contributed with some margin to guaranteeing the objectives of the program until the end of 2022. That’s why it gave the technical go-ahead to unlock the 5.3 billion dollars corresponding to that period.
The IMF’s announcement came after weeks of tireless negotiations in Buenos Aires and Washington between a mission from the Department of Economy -Gabriel Rubinstein, Leonardo Madcur, Raúl Rigo and Lisandro Cleri- with Fund technicians -Luis Cubeddu, Ashvin Ahuja and others- who discussed the details of the numbers.
Previously, at the end of February, Minister Sergio Massa had launched the political process at the G20 summit in India, where he met with the managing director of the IMF, Kristalina Georgieva, the international adviser to the US Treasury, Jay Shambaugh, and ministers of other countries with weight on the board of directors. Massa then announced that there was an agreement to change the reserve target, but the process he said was imminent took longer than expected due to the agency’s fine recalculation of numbers and bureaucracy.
Economics summarized that there were 140 hours of zooming between technicians and several high-level meetings.
The new objective will have to be officially approved by the institution’s board in a session in mid-March, but it is estimated that the political field has already been cleared for approval.
According to the original program signed last year, the government should have approximately 7,800 million dollars in the power plant’s coffers by the end of March, 11,000 in June and approximately 12,125 by the end of 2023, which now seems impossible to meet because the government it estimates losses from the drought to be between US$15,000 and US$20,000 million, added to the daily US dollar losses.
In a statement, the Fund said the discussion on easing took place as part of the fourth program review, which has been approved. The targets for reserves, the fiscal deficit and the monetary issuance were met in the last quarter of last year and for this reason, when the board of the Fund approves it in a few weeks, 5,300 million dollars will be released. But, as usual, even the technicians have reviewed the path to follow and this year the reserve accumulation numbers have not closed.
Due to the drought affecting the crop, the war in Ukraine, various stocks, the dollar gap, an economy that will grow less this year and the government’s refusal to devalue at a higher rate, the Central Bank will not he accumulated dollars as he had expected calculated in the initial schedule.
Until now there had been some creative accounts and gadgets like the “soy dollar” used, which the Fund tolerated with waivers (thank you) to keep the program running. But that’s no longer enough because there isn’t enough soy to liquidate.
With a more comfortable reserve target, the government will not need waivers and will be able to avoid major shocks to the exchange rate in an election year. The way is also cleared to obtain two more disbursements that are already expected before the PASO elections in August and the presidential elections in October.
Source: Clarin
