Economists from different backgrounds agreed that the agreement with the International Monetary Fund (IMF) is the best possible in the current context and that it is feasible to meet the fiscal, foreign exchange and reduction goals for assistance from the Central Bank to the Treasury.
This is how they pointed it out to Télam the director of the Center for Argentine Political Economy (CEPA), Hernán Letcher; that of Epyca Consultores, Martín Kalos; that of Libertad y Progreso, Aldo Abram, and the partner of AdCap Grupo Financiero, Javier Timerman, though with differences regarding the speed of exchange adjustment and the need or not to apply structural reforms.
As reported by the Minister of Economy, Martín Guzmán, and the IMF itself in a statement, The agreement will seek the gradual reduction of the primary deficit and the financial assistance from the BCRA to the Treasury, a rise in rates to positive levels, periodic adjustments in the price of the official dollar without sudden jumps, and the agency’s commitment not to demand reforms in the workplace and the public sector.
For Timman, agreement is important because “avoid adjustment” Y “shows that the IMF believes in the ability of the government” by Alberto Fernández, while Guzmán “achieved better times, since everyone agreed with the objectives of lowering the deficit, the exchange rate gap and that there was no way to pay US$ 22,000 million in one year”.
“The agreement is what could be accessed in the current context,” said Letcher, who objected that “it does not reflect the IMF’s co-responsibility in the Argentine debacle” and admitted his concern about the quarterly reviews since “they leave the door open” to new requirements, to the extent that “the mechanism of disbursements tied to maturities is very relevant”.
Kalos I consider “relatively feasible” compliance with the primary deficit goals, to the extent that “the government coalition agrees within it to reduce energy subsidies, a debate that was not resolved in 2021.”
In this regard, he warned that the strategy of raising rates below inflation “is not an adjustment but quite the opposite”, and, if it is not corrected, “there will be increases in subsidies and we are going to have a problem.”
About the assistance of the BC
letcher maintained that the primary deficit reduction curve is “complyable”, although he recognized that he would have liked “a more comfortable scenario”.
“The same happens with the assistance of the BCRA, the two issues are related to some recent measures to redirect bank funds to Treasury financing,” he said.
According to Kallos, The reduction of 3.5 points in BCRA assistance “is one of the main challenges” and its fulfillment “will depend on the government being able to finance itself in the market”, for which he considered it necessary to have “more details on indirect monetary financing”.
In the same sense, Timerman remarked that “in order to lower the assistance of the BCRA, it is necessary to finance it by other means, be it fiscal income or financing from the private sector.”
“That is achieved with growth or market confidence,” full.
abram He pointed out that the lower deficit “would come from greater tax pressure and a sustainable growth rate, something that will not happen if the private sector continues to be overwhelmed by the weight of the State.”
“Expenditure is financed with more tax pressure and absorbing most of the credit, so the adjustment is made by the productive private sector,” warned.
Exchange market
economists they coincided in which the objective of do not apply an “exchange jump” and, in this sense, Kalos stressed that “until now, the government has not faced currency runs”, while “the stocks allow the official dollar to be controlled”.
For Letcher, “The agreement does not solve the foreign exchange front, but it takes pressure off it” because it allays fears of “a default scenario”, while Timerman celebrated that the IMF understood that “an aggressive devaluation was going to be transferred to prices”, in addition to including in the menu “a rise in interest, since it is difficult for an economy to function reasonably with negative rates”.
abram indicated that “A gradual acceleration of the exchange rate will be carried out to try to recover the delay generated by the BCRA in 2021”, while forecasting that “the increase in the wholesale exchange rate will be above 20% in the first half of 2022.”
Refering to gap between the official dollar and the financial ones, Timerman considered her “unsustainable” and advocated “reducing it within a framework of gradualism”.
Structural reforms
Structural reforms were main point of contention: for Timerman “the Fund understands that they do not take place until there is a different political context” and for Letcher their non-demand “is a distinctive positive fact with respect to previous agreements”.
Abram focused his remarks on that “It is based on the mistake of believing that the public sector is the engine of growth” but “no matter how beautiful the agreement may seem, if the reforms are not carried out in the long run it will not be fulfilled.”
Kalos distinguished the need to advance in the tax and pension reform, but not in the labor reform. “A productive agenda is needed and today it doesn’t depend on labor costs, which have dropped a lot and that’s not why production has increased.”
In addition, he added that “these days, it was clear that A comprehensive reform of the energy sector is lacking”.
