The board of the International Monetary Fund (IMF) meets this Friday to analyze the approval of the agreement reached by the staff of the multilateral organization with Argentina, which will refinance the debt of 45,000 million dollars taken by the government of Mauricio Macri in 2018.
In Washington the perspective of analysts is that the IMF board will endorse the understanding reached by the staff with the Argentine officials headed by the Minister of Economy, Martín Guzmán, after the parliamentary approval of the bill sent by the Executive Branch.
On Tuesday, ahead of tomorrow’s meeting, the head of the IMF, Kristalina Georgievkept a zoom with the president Alberto Fernandez and with the minister Guzman.
Board approval will allow triggering a first disbursement of 9,800 million dollars immediatelywhich will serve to pay very short-term maturities and to strengthen the reserves of the Central Bank.
In this way, The IMF extended until Thursday, March 31, the term for Argentina to pay the interest and principal that were originally due on Monday, March 21 and Tuesday, March 22.for a total amount close to 2,800 million dollars.
After the contact they had on Tuesday, the president Alberto Fernandez said he kept a “constructive” conversation with Georgievain which both reaffirmed the importance of the Extended Facilities Program that the board will deal with tomorrow.
The head of the IMF said, for her part, that the head of state conveyed to her Argentina’s commitment “to make your economic program a success“.
The Paris Club
The contact between the President and Georgieva took place almost at the same time as the meeting that Minister Guzmán held that day in the French capital with the head of the paris clubEmmanuel Moulin, in which they agreed to extend until June 30 the deadline to renegotiate the debt with the forum of creditor countries.
The Paris Club had granted Argentina in June 2021 a term until March 31, 2022 to renegotiate a debt of 2,000 million dollars, waiting to first have a program with the IMF.
The delays in reaching the agreement with the Fund, on the one hand, and the good predisposition of the Government and the staff with the technical understanding, were taken into account by the forum to postpone the “time bridge” for one more quarter, until June 2022, to give rise to a renegotiation of the debt, in which Argentina asked to lower the cost of interest from 9% of the old agreement signed in 2014, and obtain a grace period of 3 years.
This new understanding also includes financial guarantees by the Paris Club in support of the Extended Facilities program that has a duration of thirty months, allowing Argentina to secure the financial sources identified in the agreement with the IMF.
Consequently, with the imminent endorsement of the agency’s board of directors for the extended facilities agreement, Argentina and the Paris Club undertook to conclude the process of definitive modification of the Agreement defined in the “Joint Declaration of 2014” before June 30, current year.
The program with the IMF will have in the first two and a half years 10 reviews by the agency, which will be quarterly.
During the first year there will be net financing from the IMF equivalent to 0.7% of the Gross Domestic Product (GDP), to recover reserves.
and add a extra financing of US$ 2,600 million from other multilateral organizationsto help close this year’s fiscal doldrums.
In this framework, it is projected that the external current account will remain in surplus, and together with an increase in foreign direct investment (FDI) and the inflow of net official flows, it will facilitate an accumulation of net reserves of US$ 15,000 million over the throughout the program, among other proposed goals.
