Martin Guzman with Kristalina Georgieva
The government has decided to close the first review of the program with the IMF. The coaching staff gave their approval this Wednesday after checking the fiscal and monetary accounts and reserve build-up for the first quarter, and will now remain subject to approval by the agency’s board of directors, which should be evaluated in the coming weeks.
If approved, the second disbursement should arrive on 10 June, $ 4.03 billion. A key amount to address deadlines of $ 3,000 million on June 20 and 21.
“IMF staff and the Argentine authorities reached an agreement (staff level agreement) on the updated macroeconomic framework and necessary policies related to the completion of the first review of the 30-month extension agreement, “Julie Kozack, director of the Fund’s Western Hemisphere department, said Wednesday.
The official stressed that “the deal it is subject to approval by the IMF board of directors, which is expected to discuss it in the coming weeks. Once the review is complete, Argentina would have access to $ 4,030 million (equivalent to SDR 3,000 million). “
Kozak led, together with the head of the mission in Argentina, Luis Cubeddu, the formal personal and virtual negotiations with the team of Martín Guzmán to discuss the measures to complete the first review. On both sides, they noted that it was agreed to keep the annual targets unchanged.
“This is key to strengthening stability and supporting the ongoing recovery. Commitment by the authorities to implement additional policies to meet annual targets is welcome, “the agency said.
The government, on the other hand, has proposed to modify the quarterly objectives of the fiscal path and the accumulation of reserves, two fronts that have been complicated in recent months by the deterioration of public accounts and by the difficulties in accumulating currency by the Central Bank.
The review, according to the IMF, focused on “performance evaluation of the program since the approval of the agreement, analyzing the effects of the great external impact of the war in Ukraine on the Argentine economy and identifying policies to address its effects “.
In essence, the IMF’s technical staff and the Argentine authorities agreed that the annual targets set in the approval of the agreement will remain unchanged, in particular those relating to the primary budget deficit, monetary financing and net international reserves.
From Washington they assured that “such an approach provides a still vital for economic stability and growth in uncertain times.
The staff highlighted that all the quantitative targets were achieved in the first quarter of 2022. “Initial progress is also being made on the structural agenda and on reforms to support growth in line with the program commitments, including on the energy front”, they added.
In another part of the statement, the Fund acknowledged the effects of the international price surge on inflation in Argentina and public finances.
“The external shock associated with the war in Ukraine this year is expected to have a limited impact on Argentina’s growth and balance of payments, but, as in most other countries, Rising global commodity prices have already caused inflation to rise“the agency said.
And then he warned: “Despite the recent increases in energy tariffs, Argentina’s fiscal position is also affected from the shock in commodity prices through an increase in the energy subsidy bill and an adequate expansion of social support for low-income families “.
In view of the shock, the government has pledged to implement policies to achieve the agreed goals. On the tax front, the authorities plan to return to “give priority” to public spending reach the fiscal target of 2.5% of GDP in 2022 and reduce monetary financing to 1%, as planned.
“They also reaffirmed their commitment to continue applying the strengthened monetary and currency policy framework to generate positive real interest rates,” ensure the competitiveness of the exchange rate and support the accumulation of reserves of $ 5.8 billion for the entire year, “the note reads.
But, moreover, “to take into account the initial impact of external shocks and seasonal patterns of spending and imports, proposes to change the quarterly intra-annual trajectories of the primary budget deficit and reserve accumulationkeeping the annual goals of the program unchanged, “the agency revealed.
The Fund confirmed that the implementation of certain policies “will be essential to delivering the program in 2022 and beyond, including”take steps to mobilize net financing in national pesosimprove the transmission of monetary policy, improve compliance with the tax system, strengthen the AML / CFT framework and encourage investment in strategic sectors “.
Finally, the staff thanked the government for its participation and welcomed the commitment to implement the program, which aims to “help Argentina strengthen economic stability, address persistent high inflation and continue to face its deepest challenges “.
Giovanni Manuel Barca
Source: Clarin