The Government’s agreement with the International Monetary Fund (IMF) provided a blanket of greater certainty on the economic path that Argentina will be able to travel in the coming years and, as a novelty, it would become the first of the 22 that the country signed since it joined the organization, where it is accepted that Argentina goes through a dynamic of increase in real spending, not adjustment.
Despite the fact that the fine print remains to be seen with details of, for example, the disbursement schedule and the dynamics of subsidies and tariff policy, about a year and a half passed -August 2020- from the moment in which the Government announced his will to restructure the debt inherited with the IMF, to reach an understanding that contains such a philosophical change.
“In this agreement, it was agreed that in none of the years of the program does it stop increasing spending in real terms and that represents a great philosophical shift important to this story; In addition, adjustment variables are contemplated that can increase capital spending even more, to the extent that more resources are obtained with respect to the baseline, read other organizations such as the World Bank, the IDB or the Paris Club”, graphed a Argentine official who participated in the negotiations.
“The fiscal path was always at the heart of the discussions”, said the official who reported that until the last moment the technicians of both parties had been working to define together how the understanding that had been reached on the edge of the first expiration of the year with the IMF was going to be communicated, for US$ 717 million.
In this way, the official highlighted, on the one hand, that For the first time, the concept that to get out of an economic crisis you have to lower spending was set aside, without looking at whether that adjustment causes a recession: now it is also important to consider whether the economy is growing, to determine the level of spending and to be able to pay debts.
But also, the official referred to a concept and a change of mood in the IMF board, which began to take flight in recent weeks, especially after the IMF self-criticism report with Argentina was known,
That report not only exposed that Macri’s management ignored the recommendation of a debt restructuring and capital control, and that the IMF allowed it, when signing the 2018 loan, but also implicitly exposed the poor participation of the members of the board of directors in that loan, with the exception of the United States, the main shareholder.
It also makes it clear that the rest of the international organizations did not accompany the Fund, in relative terms, in its exposure to Argentina.
For this return, both the Fund and Argentina hope that the loan, scheduled to the extent that it can cover the inherited debt for an amount of around US$44.5 billion, will be accompanied by a greater commitment or effort on the part of other international organizations. .
The IMF left a clue about it in the statement it issued after the understanding was made official.
After noting that the parties “agreed on the path of fiscal consolidation that will form a key policy anchor of the program”, he referred to the fact that “we have also agreed that additional financial support from Argentina’s international partners would help strengthen the external resilience of the country and its efforts to ensure more inclusive and sustainable growth.
The first organism that should be seen with Argentina is the paris club, through which Argentina must restructure US$ 2,000 million before the end of March, and whose negotiations of terms and interests had been subject to an agreement with the IMF.
The data to take into account is that this rate was agreed at 9% per year, which was activated after the partial breach registered in the previous administration.
The sources consulted by Télam remarked that the World Bank stood aside of the discussion in the past.
Add to this the manifest tensions that exist between the director general of the IMF, Kristalina Georgiev, and the president of the World Bank, David Malpass, which was the one that promoted a public document in which Georgieva is accused of abuse of power and data manipulation when she held a senior position at the World Bank.
In the negotiations with the IMF, on a concrete level, Argentina managed to get the agency to commit to a refinancing program of US$45.5 billion left by the Macri administration.
In this way, the Argentina will be able to extend its payment horizon from the three years that the old program had to a decade, on an amount similar to that received by the country, within the framework of an Extended Facilities plan.
On the other hand, there remain some questions regarding financing, which would be defined “in the coming weeks” with the fine print, the Argentine source specified.
In the first two and a half years of the program, 10 IMF staff reviews will be carried out, with missions that will visit the country and whose approval will trigger the disbursements planned for the program, whose amounts have yet to be defined.
The Minister of Economy, Martín Guzmán, specified in a press conference that the capital payments paid by Argentina last year will return to the country contemplated in the new loan, which means that Argentina will ultimately receive more money in the new loan than the total remaining capital debt with the Fund.
What is not yet known is whether the return of the 2021 payments will be all in one tranche, when the final agreement is signed, and therefore it would have a significant positive impact on reserves in the very short term, or it will be distributed in successive payments.
