The statement that the International Monetary Fund issued at the end of the meeting of the Executive Board in which it approved the fourth revision of the Extended Facilities agreement and approved a disbursement of US$ 5.4 billion, recognizes the compliance of the Argentine Government for the goals committed by the end of 2022. But he marks the field for Sergio Massa on three fronts of attack, whether it intends to continue accessing funding.
While the Fund acknowledges the impact of the drought and therefore justifies more flexibility of targets, taking away any epic negotiation of something similar already foreseen in the regulations, it also says that the country has taken economic policy decisions contrary to the measures promised or otherwise required to comply with the agreement. “Policy set backs” was the term addressed in the statement (its Spanish translation “political jokes”), to refer to the latter.
When the Board of Directors approves a disbursement, it not only evaluates compliance with a program ‘backwards’ but also monitors the real possibilities ‘for the future’, ie that the objectives are achieved and that the economy does not go astray. The three main axes on which the IMF insists are:
First, adjust rates to the richest.
“The timely implementation of high-quality measures, especially improving the target of energy subsidies – says the IMF statement – will be essential to ensure that energy tariffs for high-income residential and commercial users advance to match completely with costsalso to reduce the regressivity of the system”.
The Ministry of the Economy and the Undersecretary of Energy hide behind the argument that in the case of electricity and gas subsidies, only 3% of the families that should have joined did so. They estimate that there are between 1 million and 1.5 million families who may need the help and have not signed up. Reversing subsidies in this way could be counterproductive, the government points out. But this explanation clashes with the IMF’s board of directors, where there are advisers representing countries where bills have increased by 66% or 120% in twelve months and their inflation rate reaches 10% at most. Difficult to explain in Washington.
The second point, limit the impact of the moratorium.
The IMF refers to this point with the term “political setbacks”. Massa told the IMF “I did not go”. And the The same day it was approved by Congress, the staff carried out investigations in Buenos Aires.
“The fiscal cost of the new pension moratorium -says the agency-, must be mitigated through rigorous regulation to aim at entry only to the most needy”. The government now has to see how it will get income to be gradual and not endorse a policy against the adjustment that needs to be made to have a primary deficit of 1.9% this year.
Finally, the price of the dollar increases.
The multilateral real exchange rate prepared by the BCRA is below the level when the program with the IMF started in March 2022. It is true that it has been recovering since October and in the statement the same agency acknowledges this, saying it should continue as This (“crawl rate should continue to support competitiveness”). The term in English crawling peg is an economic technicality to indicate that the price of the dollar must increase at the rate that the prices of the rest of the economy do, ergo, as prices continue to rise, so will the exchange rate so as not to fall behind.
However, not delaying the dollar is not enough for the IMF, according to the statement.
The IMF does not mention a desirable level of the dollar, but it does mention the disarming of restrictions in the foreign exchange market, which ultimately means a higher exchange rate and fewer trade barriers or BCRA interventions. The IMF, which does not agree with the developments, even if it would already be willing to accept it for the Argentine case, according to sources closely following the negotiations. Miguel Pesce refuses. As in October 2020 after the exchange with bondholders.
Source: Clarin
