Martin Guzman and Kristalina Georgieva. A relationship that will continue to speak.
Coco Basile responded to those who criticized her for not holding 11 starters well on the court: “I stop the team, the problem is the game starts and the players are moving”.
The economy is the same. And the plans or programs or speak. What economists wrote in the paper nothing to do later. Not just because sometimes contexts change (and there’s no way to predict it) but also because demands and actors emerge in the middle.
Thus, just two months after the Extended Facilities Agreement with the IMF entered into action, the main objectives of the program undertaken by Argentina to fulfill (fiscal deficit, emissions and accumulation of reserves) they will appear on guardrails carved by Fund staff to take damage control and that the economy does not collapse.
What happens if those three variables come out of the objectives?
For consulting firm Eco Go, headed by Marina Dal Poggetto, pressure on Martín Guzmán could cut the fiscal deficit from 2.5% agreed with the IMF to 3.2%.
The disbursement scheduled for September, US $ 4,169 million, will come into discussion whether it is fulfilled or not. A speculation that will not give any favor to the Government, especially last Friday when Martín Guzmán failed to renew the maturity of the approximately $ 170,000 million in the tender he had. He had to settle for $ 156,740 million.
The Government is thus moving forward in a scenario where it will further count the grains it has left behind.
In principle, you can count on the US $ 4,169 million that the Fund will send you in June. This is because the examination in the first trimester of the year (the program has four quarterly reviews this year) it will be fine. In any case, it would be an anecdote that staff observe the recording as income of so-called property income from the Treasury (a using made by the Treasury to record debt at a market value higher than the book value due to inflation).
Yes, on the other hand, it will be more complicated for the IMF to endorse it in the second quarter. Guzmán was warned.
Figures and analysis began to circulate in that market, unless Guzmán asked for a waiver, the program goals between April and June did not pass.
“After the fiscal data for April, the likelihood of going on a waiver for second quarter purposes increased,” said ACM’s Javier Alvaredo.
The IFE, the decision to expect Earnings from August to June and the inability of the Central Bank to gather more reserves at the current exchange rateto disfigure the road map drawn.
The IMF will provide assistance. Recalibrate program parameters along with new estimates of inflation and other arguments rooted in the change in the global context due to the war in Ukraine and the invasion of Russia.
But it does not endorse its own economic policy decisions and those are not the Economic agreements. For example, public spending in the month of May rose 80% annually, more than inflation. The main deficit in the first quarter was double that of 2021.
On top of that, in May the trend didn’t look any different. The first installment of $ 9,000 from the new IFE was paid for 8 million people and the bonus of $ 12,000 to 5 million retirees receiving up to two minimum payments. In June the Treasury will collect less than expected Revenues for the steps taken by Sergio Massa in Guzmán (they are scheduled for August).
Consulting firm FMyA estimates that June’s deficit will be double than last year. It will close the quarter at 0.68% GDP, which failed to reach the fiscal target for the second quarter of 0.45% GDP.
“Since April, we have started to see a slowdown in revenue and spending of public accounts,” said Javier Alvaredo, director of ACM. “Argentina are unlikely to reach the goals for the second quarter and they have increased the likelihood of requesting it a waiver of the IMF. I don’t think the procedure to access the disbursement is simple or they give the green light just like that ”.
Regarding the second goal, financial issues, only $ 40,000 million is left to reach the top of the second quarter ($ 440,000 million). Guzmán has already spent 60% of the goal in just five months.
Finally, the third goal is the accumulated reserves.
Here too the picture does not seem simple. Agribusiness liquidated US $ 4 billion in May, but net reserves only increased by US $ 500 million, according to FmyA calculations. “Right now, net reserves are close to US $ 4,000 million and to reach the goal for June they must reach almost US $ 6,400 million, almost US $ 2,600 million more than today. Hard to identify. We assume that the central the trap will be tightened or a waiver will be demanded before accelerating the depreciation of the peso”said Fernando Marull.
Guzmán knows this and that’s why he insists, in order to compensate for the BCRA’s passivity, the deficit must be reduced.
A work by consulting firm Analytica argues in this sense. He concluded that the goal of the program with the IMF to accumulate US $ 15,000 million in reserves over three years was “a chimera” because such a thing had only happened three times since the 1970s. This only happened because of major changes in macroeconomic and pro-market reforms. And that if the alternative to increasing reserves is through devaluation, the cure may be worse than the disease due to high inflation and poverty.
Conclusion?
“The key is to reduce the financial deficit”says Analytics.
Economist Fernando Navajas analyzed last week in an interview with Infobae that Guzmán faces the so -called macroeconomics “Open balance window”an expression from the late 1980s to describe when a government was faced with multiple demands that put pressure on deficits and inflation. knives published that paper together with Daniel Heyman. Both Guzmán teachers.
Eco Go consultancy, led by Marina Dal Poggetto, already sees the fiscal deficit for this year, instead of the 2.5% of GDP signed with the IMF, in 3.2%. What is not known is whether the Monetary Fund will agree to make a disbursement if the deficit, and at least not diminish.
Source: Clarin
