The government has decided to bundle April debt payments by $2 billion by the end of the month. This is a structure contemplated in the organization’s regulation that allows the Ministry of Economy postpone the payment of $1.3 billion due on Tuesday and another $700 million next week, as it continues to seek $15,000 million in financing to boost reserves and increase inventories.
Official sources confirmed the measure this Sunday underlining that “as is customary, payments to the IMF are carried out in groups at the end of the corresponding month“In reality, the Economy had already done so in January, before restoring the fallen agreement with the organisation. Now, Minister Luis Caputo is trying to renegotiate that agreement and will go next week to the spring meeting of the Fund which will be held in Washington among him April 17th and 20th.
The unification of payments was known amid discussion in the organization to review its policy on tariffs and surcharges for 2024 and 2025, a measure that could favor Argentina. The board met in March to realign revenue streams, and with targets met by the end of this year, some directors proposed reviewing surcharges and using surplus funds to help low-income countries.
In this framework, the administrators of the Fund They welcomed the fact that precautionary balances continued to increase, They are expected to reach the current medium-term target of $33 billion by the end of 2024 and “noting that target achievement will be ahead of schedule, several directors saw this as an opportunity to review policies on pace of accumulation of precautionary balances, including the surcharge policy”.
“Several Directors also considered it appropriate to explore ways to use excess precautionary balances accumulated above the target, inter alia to address difficulties faced by low-income countries. Directors welcomed the fact that the indicators coverage have continued to strengthen, even as IMF lending in response to multiple shocks remains near historic highs,” he added.
Due to the increase in tariffs in recent years, Argentina will have to pay $3.4 billion in interest to the organization in 2024. The rate is 4.1%, but the Fund also applies 4 additional points of surcharge if certain limits are exceeded for the $44 billion loan that Mauricio Macri took in 2018. Therefore, if the IMF eliminated this surcharge , the government This year, about $1 billion could be saved, almost 30% of the total interest amount.
Argentina is considered a middle-income country, but Alberto Fernández’s government is calling for a cut in the surtax, a proposal now also supported by Javier Milei’s management. At the G20, Foreign Minister Diana Mondino proposed in February that “a quick and cost-effective way to bring immediate financial relief to middle-income countries is to review the IMF’s surcharge policy.”
According to the Fund, “the council should do this review and set the rate margin in the context of the review of the Fund’s revenue situation for the years 2024 and 2025 in April 2024, and a review of the surcharge policy is expected during 2024″ and “any changes to current policies would have implications in forecasts of income and balances precautionary.”
In Washington, there is resistance to reducing surcharges since half of the average income from loans corresponds to this reason, and in turn, 53% of the funds obtained from the collection of surcharges come from the largest debtor of the organization, which is Argentina. While the Fund’s exposure to Argentina has been moderately reduced, it is expected to remain high at around US$40 billion through 2027 before starting to decline.
Source: Clarin
