Due to the drought, Massa is now negotiating a reduction in the fiscal adjustment with the IMF

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Sergio Massa has decided to take a short break and he spent this rainy Sunday with his family. After a series of meetings in Washington and the visit of US officials to Argentina, the economy minister is preparing for another intense week. His team, led by Leonardo Madcur and Gabriel Rubinstein, It has already resumed negotiations to revise the deal with the agency in light of the impact of the drought.

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At Massa’s request, The Fund changed its reserve accumulation target last month to meet the schedule. And now the loss of revenue for the drop in exports of up to 15,000 million dollars has become another factor jeopardizing the fiscal target. In this context, the government is looking for new reliefs that will allow it to get to the elections without the agreement signed a year ago exploding, as happened to Mauricio Macri.

Massa spoke about it last Friday face to face with the agency’s number two, Gita Gopinath, at the Pennsylvania Street office. “What Massa has proposed to the IMF is to put drought on the table and in the accounts. And that we had to go back to discussing objectives and disbursements. still strong this week,” confirm sources in the Ministry of Economy.

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In that meeting, Gopinath recognized him it was the “worst drought in Argentine historyand promised to work closely to “strengthen” the program. In its latest review, the Fund estimated a more than $5 billion drop in exports due to lack of rain, a third or less of private forecasts. Now, in Economics they believe it is a I “get” Washington to acknowledge the negative effects higher than originally anticipated.

Amid the currency flight, the IMF last month it reduced its net reserve target by $3.6 billion for March and $1.8 billion for the full year. Last week, however, he worsened his forecast and estimated just 0.2% of GDP in 2023, while raising the expected inflation rate to 88% in December, still far from the 120% market forecast. Gradually, the program moved away from its goal of “stabilizing” the economy.

Now, one of the cards in play is the revision of the objective of a primary deficit of 1.9% of GDP, which arises from the level of income and expenditure. The premise is that it will further reduce export duties. In March, it it has plummeted 64% a year. “They can renegotiate because the drought generates 1 point of GDP less revenue from withholdings, less withholdings, less activity, more than that they can’t,” economist Miguel Kiguel assessed.

It wouldn’t be the first time this has happened. In the first two months, Argentina exhausted nearly the entire fiscal target for the first quarter (March data will be released on Thursday). But the head of the Fund, Kristalina Georgieva, ratified the government’s commitment to “continue to adjust policies”. This is a cut in energy subsidies and social spending, with greater constraints on the moratorium and on social plans.

In Economics, they make sure “all the problems are on the table.” “It’s not a separate thing, it’s not the only tax axis”, they explain. In fact, an advance of disbursements is envisaged and a revision of the reserve target, one of the most difficult points, is being evaluated. Is that the IMF just authorized the 3 soybean dollarsomething that is not foreseen in its policiesand in return would require a major devaluation of the official dollar, which would mean a major inflationary adjustment.

Source: Clarin

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