While an unprecedented rate of inflation was spreading in Buenos Aires for several decades, Minister Sergio Massa traveled the corridors of the International Monetary Fund to try to get the program on track with the agencywhich is tricky for the June review.
“All factors of the drought affected”, they said from the economic team after a hectic day in Washington. “We will try to ensure that the program with the Fund and the measures we take improve the inflationary outlook”. added, without further details.
It is an increasingly difficult context for our country. The drought hit the program hard with the Fund, which despite some setbacks had been met last year. Inflation rose to 104% in one year, the highest in 3 decades, with a leap of 7.7% in March compared to February. It is added the rise of the dollar, who broke the 400 peso barrier on Thursday, and all this in a scenario of electoral uncertainty.
In its projections revealed on Tuesday, the IMF estimated that Argentina’s inflation will reach 88% at the end of the year and an average of 98%, much lower than expected by private forecasts. They also anticipated that the country would experience almost zero growth, 0.2%.
The issue of inflation and drought were part of a key meeting Massa held this Friday with Gita Gopinath, number two of the Fund, at the agency’s headquarters, as part of the Spring Assembly.
In the meeting with Gopinath “it went very well for us”, say sources from the Economy. And they added that “a new opportunity is opening up for Argentina”.
At the end of March, the board of directors of the organization approved the fourth revision of the programme – which covered the last quarter of 2022 – and made an outlay of 5.4 billion dollars. But the personnel report came with a number of caveats for the first quarter of this year, mostly due to the impact of the drought which has drastically reduced reserve accumulation. In this context, the Fund agreed to reduce the funds target in the Center (US$3.6 billion at the end of March and US$1.8 billion for all of 2023).
Times are dizzying in Argentina and the outlook has deteriorated since then. For this reason it is estimated that this flexibility in reserves it won’t be enough to successfully complete the fifth revision and from the government they were enthusiastic about a slack Deeper.
The reality is that neither the Fund nor the United States – the organization’s main shareholder – are in the interest of Argentina which is exploding, much less before the PASO and the general elections. A schedule with tweaks is better than throwing everything away.
Before the appointment with Gopinath, Massa met with key White House officials and economic experts at the Argentine embassy, including Mike Pyle, economic adviser to the National Security Council. From there the economic team started off confident. “They will work with us,” they said.
“We will support the technical agreement reached with the Fund”the Americans said, according to Economy sources.
Own Kristalina Georgieva acknowledged the impact of the drought in a press conference, but argued that the program must be implemented: “We know that Argentina has been severely affected by a severe drought which has undermined the performance of the economy and this has negatively affected and significantly the country. This complicated the task of the authorities,” he said. She added: ‘Obviously this is just about implementation and will continue to be under these very difficult circumstances.’
In an election year, Massa must also demonstrate to Washington that he is activating the measures the Fund is calling for: an acceleration of the removal of electricity subsidies for higher-income households; a cut in the new pension moratorium to cushion the impact on the deficit (they advise him to reduce half of the 800,000 people envisaged by the new system) and a rearrangement of social allowances.
But the good will of Massa and the government, in an election year and with a serious perspective, may not be enough to achieve all the objectives.
Source: Clarin
