Just a month ago, the Monetary Fund issued a statement in which it marked the field for the Minister of Economy, Sergio Massa, on four aspects of economic policy.
He indicated there that the government should take steps to increase the rate of appreciation of the dollar, limit the impact of the moratorium, raise the interest rate and reduce the burden of subsidies.
A few days after that statement, the agency released a report with more details on each of these issues and the outlook for the Argentine economy. On the energy issue, specifically, it has sanctioned that in its pages energy subsidies were to fall from 1.9% of GDP in 2022 to 1.5% this year. And that in April the Government had to publish a new resolution which carried out the total elimination of electricity subsidies for the highest-income sectors and also raised the rates by 31% for businesses.
Therefore, in this context and prompted by the IMF, the government moved at full speed between Friday and Tuesday. He reported that gas bills are increasing by 30% across the country and electricity bills by 400% year on year, at least in Buenos Aires and the suburbs.
Rate corrections occur in parallel with other adjustments, all in line with IMF requests: the Central Bank has accelerated the rate of devaluation since that agency’s report and has also raised the interest rate.
Argentina’s economy has been experiencing exchange rate turmoil for the past two weeks, especially since the blue dollar soared $100 in 15 days and hit nearly $500 last week ($474 yesterday). This has led the government to make announcements to calm the financial and blue dollars, while in parallel trying to make the program more flexible with the IMF and see how the disbursement that corresponds to it in June is secured, but also that the IMF advances the payments for September and December . About 10 billion dollars.
In April 2021, two years ago, former Economy Minister Martín Guzmán clashed with La Cámpora when he sought an agreement with the IMF and failed to prevail due to resistance from the Undersecretary of Electricity, Federico Basualdo to reduce subsidies. Basualdo was politically supported by Cristina Kirchner.
A year later, in March 2022, Guzmán managed to conclude a deal just days after Argentina defaulted with the IMF. Máximo Kirchner, MP, and La Cámpora voted against. The IMF proposed an average increase of 60% and Kirchnerism 20% (as authorized by public hearings).
Guzmán left and took over Massa in August 2022. He promised he would adjust the rates in September. It didn’t happen. Energia justified the delays because it said that only 3% of the families that had to be entered in the subsidy register had done so.
Why then doesn’t Kirchnerism invalidate these rate hikes now?
Because it is the letter that will help, via Massa, the Frente de Todos to obtain the best negotiation in Washington to return with the money for the elections.
Source: Clarin
