Argentina, IMF reach new understanding
Argentina and the International Monetary Fund (IMF) have reached an agreement in principle on the fifth review of the South American country’s credit program, it was announced Sunday.
The teams of the Ministry of Economy and Central Bank of Argentina, and the IMF staff have finalized the core aspects of the technical work of the next review, it was announced in a joint statement.
Technical advisors have agreed on the core objectives and parameters that will be the basis for a ‘Staff Level Agreement’ that is expected to be finalized in the coming days to then move towards the review of Argentina’s program, it was explained.
Said agreement seeks to consolidate the fiscal order and strengthen reserves recognizing the strong impact of the drought, the damage to exports, and the country’s fiscal revenues, the statement added.
A delegation from Buenos Aires traveled on July 16 to Washington to seek to relax the goals of the credit program for 44 billion dollars signed with the IMF in 2022, as well as to obtain the expected disbursements.
Argentina has been unable to meet the goals of accumulating international reserves and reducing the fiscal deficit set for the first and second quarters of this year, ahead of the presidential elections. Private analysts estimate that the country’s net reserves are in the red. In addition, annualized inflation is over 115% and poverty is around 40%. On June 30 it had to pay maturities for US$ 2.7 billion with Special Drawing Rights (SDR, the countries’ fund reserves in the IMF) and with yuan. By July 31 it must pay an additional US$ 2.5 billion.
Argentina signed in March 2022 with the IMF a loan to pay off the US$44 billion disbursed under then-President Mauricio Macri (2015-19) for US$57 billion, the largest in the history of the multilateral organization. The program agreed in 2022, which allowed Argentina to reschedule the debt and avoid falling into default, provides for 10 quarterly reviews.
Staff-level agreements between a country and the IMF must be approved by the IMF Executive Board for funds to be released. Disbursements between US$ 8.4 billion and 10.4 billion dollars are expected from the IMF shortly
The Argentine Government of President Alberto Fernández has repeatedly argued that the strong impact of the drought, the damage to exports, and the country’s fiscal revenues will be taken into account for the renegotiation.
Economy Minister and presidential hopeful Sergio Massa is expected to travel to Washington this week to finalize the new agreement, after which several measures are to be announced in Buenos Aires to strengthen the reserves and improve fiscal sustainability. According to Página 12, the Argentine government would apply a tax on imports of certain items and the agricultural dollar would be raised for certain exports.