IMF and Argentina still negotiating to recalibrate the program: “Everything is on the table”

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In a decision that will have a major impact on the Argentine economy in a pre-election periodthe International Monetary Fund has deemed that the “worst drought in history” has drastically affected the parameters of the program with the organization and for this, they say in Economy, it is now opening a new chapter: according to the “new reality”, IMF officials and Argentines will sit back to recalibrate goals and look for any other tools needed for Continue the program.

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In a tweet released this Saturday, the number two of the Fund, Gita Gopinath, who On Friday he met Minister Sergio Massa, he said it was “a good match”. “We talked about the impact of the worst drought in Argentina’s history and promised to continue working closely together to strengthen the program in this difficult scenario,” she added.

“All options are on the table”, say sources of Economy. It’s not a new program, they warn. Fund officials and Sergio Massa’s team they will review all aspects of the existing and “recalibrate” as necessary for the new times marked by drought and inflation which already exceeds 104% per year, as announced on Friday.

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Economy Minister Sergio Massa and Gita Gopinath, number two at the International Monetary Fund, held a meeting in Washington on Friday 14 April.

Economy Minister Sergio Massa and Gita Gopinath, number two at the International Monetary Fund, held a meeting in Washington on Friday 14 April.

All goals (or just some) could be made more flexible, but they could also be used other tools such as postponements of deadlines, advances of disbursements and other resources available according to the statute of the Fund.

there is a hurry so that everything resets quickly. good part of economic team does not return to Buenos Aires and stay to negotiate in the American capital, while Massa could be back in Washington in two to three weeks.

The idea is that as early as the fifth revision of the program, which the board must approve in June, all possible changes are presented.

On Friday afternoon the official had met Massa. It was the most decisive meeting the minister had in Washington, where he theoretically came to attend the Assembly of the Fund, but above all to try to find some relief from Argentina’s harsh situation.

Gopinath first received him in his office at the Fund, where the obligatory photos were taken, and then they went to a room with extensive equipment. The Indian-born official was accompanied by Nigel Chalk, deputy head of the Western Hemisphere Department; Luis Cubeddu, head of mission for Argentina and others. Massa was with his chief adviser Leonardo Madcur, the deputy minister Gabriel Rubinstein, the head of the agencies Marco Lavagna and the representative to the IMF, Sergio Chodos.

The one who opened fire was Gopinath, they said in the Economy. He told Argentines that the drought was a “game changer” and that they didn’t think it could have such an impact. They stressed that the government has made an effort in the fiscal area that has started to work well, but now we need to see “how to strengthen Argentine stability on the basis of the new reality”. And that we had to work together on this new challenge.

It is known that the program was approved by Congress – in the midst of a strong tug of war – and in a year of electoral turmoil it would be difficult to change it. But Gopinath clarified: “It’s not about a new program, it’s about redefining the goals.”

Massa breathed a sigh of relief. In the economic team they point out that “the Fund understands that the drought has impacted in a volume that no one imagined in January and February”. They say it could mean a hit of between 9,000 and 14,000 million dollars in exports.

“The decline in harvested volumes hits brutally and forces us to rethink fiscal issues and the need to guarantee instruments that strengthen reserves”, they explain.

The agency’s board approved the fourth revision in late March, which covered the final quarter of 2022, and disbursed $5.4 billion. 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).

But the drought has continued to worsen since the beginning of the year, inflation has risen and the dollar has broken the 400 peso barrier. Changing the backup target was no longer sufficient and more flexibility was needed.

The changes “would enter the next revision, the fifth,” they say in the Economy. “Everything that is needed will be reviewed. Part of the story could be that deadlines are postponed, disbursements are brought forward, fiscal targets are recalibrated, those of reserves, nothing is defined. What is now is a new negotiation process. Anything can be,” they explain. One could also appeal to the fund for resilience to climate change, which Argentina has not yet appealed to: there they could get “It doesn’t go back to zero. A new stage begins”, they add. Since this is not a new program, it will not be necessary to repeat the Congress, where the procedure would be In Economy, indicate that the Fund will work in coordination with the Inter-American Development Bank (IDB), with the World Bank and with Massa’s team to “seek solutions that strengthen Argentina’s macro situation in the short term”, that is, quick-disbursement loans that can serve to strengthen reserves.

This change of plans would not have been possible without the support of the United States, the IMF’s main partner and contributor. From Economy, in fact, they said that “the United States has a lot to do” on this issue.

In fact, Massa was meeting a few hours before the appointment with Gopinath with senior White House officials, experts in the economic field, including Mike Pyle, economic adviser to the National Security Council and Juan González, special adviser to President Joe Biden for America Latin. From there the economic team started off confident. “They will work with us,” they said.

“We will support the technical agreement they will reach with the Fund,” the Americans said, according to Economy sources.

The reality is that neither the Fund nor the United States would like Argentina to explode, much less before PASO and the general election. A tinkered program is better than throwing everything away. The organization has fresh memories of what happened after the defeat of Mauricio Macri and the hiring of Alberto Fernández, when such a disaster occurred that it meant the paralysis of the program for more than a year until it began to be negotiated by the minister Martin Guzman

Source: Clarin

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