A group of Democratic legislators requested this Monday to the head of the United States Treasury, Yanet yellen, that the United States endorse to the IMF the idea of reviewing the flight attendants that apply to countries with exceptional loans, among which is Argentina.
The initiative is promoted by 18 Democratic legislators, among which are Jesús García, Alexandria Ocasio-Cortez and Pramila Jayapaly, among others.
“The IMF’s surcharge policy is an obstacle to growth and social investment in developing countries and undermines efforts to address the immense challenges facing the world at the moment, “congressmen wrote to Yellen, according to a Bloomberg cable.
The congressmen, based on calculations prepared by the Center for Economic and Policy Research (Ceper, for its acronym in English), they estimated that, “between 2018 and 2023, Argentina will spend 3.3 billion dollars on surcharges – nine times the amount it would cost to vaccinate all Argentines against COVID-19-“.
In this framework, the Democratic legislators urged to review the current policy of surcharges of the IMF, after the US refused to innovate in this policy, according to the last vote in December in the IMF board of directors.
In the letter, lawmakers called the IMF’s current surcharge policy “unfair and counterproductive” and said it deprived countries of the resources needed to fight the Covid-19 pandemic, while indicating that it could increase the risk of default of countries with debt problems.
Today, I led a letter with @RepAOC, @RepJayapal, and 15 members of Congress urging @SecYellen to oppose the IMF’s surcharge policy, and calling on the IMF to abolish this policy that punitively impacts developing countries. https://t.co/rof3XxVrrY
– Congressman Chuy García (@RepChuyGarcia) January 10, 2022
The request of the democratic legislators is the same one requested by Argentina and other emerging countries, and was endorsed by the G20 at the last summit of presidents held in Rome, last October, where the IMF was instructed to review the current policy of surcharges.
The IMF board debated this issue in one of its last meetings before Christmas, where some members were in favor of temporary relief, while others said no that they do not see the need to review that policy, according to an IMF statement.
Among those who objected, “they mentioned the low overall total cost of the Fund’s loans and the role of surcharge income in ensuring an adequate accumulation of the agency’s risk reserves,” the IMF revealed.
It later emerged that the United States, the Fund’s main shareholder with a 16% stake, had refused to review that policy.
In the letter, lawmakers called the IMF’s current surcharge policy “unfair and counterproductive” and said it deprived countries of the resources needed to fight the Covid-19 pandemic, while indicating that it could increase the risk of default of countries with debt problems.
Meanwhile, Germany, France and Great Britain are open to reviewing the IMF’s policy of surcharges, among the most important.
The revision of the flight attendants is also endorsed by a community of economists of international weight, among which are the Nobel Prize winner Joseph Stiglitz, professor at Columbia University; and Kevin Gallagher, director of the Center for Global Development Policy at Boston University; and Jeffrey Sachs, director of the Earth Institute, also at Columbia University.
By the way also this monday Stiglitz praised the “surprising” recovery of the Argentine economy, and was against the board members who promote drastic adjustment, as a condition for reaching an agreement..
In an article published Monday in the independent project Sindicate, the Columbia University economist said that “while everyone should know by now that austerity is counterproductive, some influential IMF member states may still defend it. “, referring to the members of the board of directors who want Argentina to apply a more accelerated reduction of the fiscal deficit, as a condition to endorse the agreement.
Stiglitz also considered that “an agreement that simply extends the repayment term from 4.5 to ten years is not enough to alleviate concerns about Argentina’s debt.”
The Nobel laureate recalled that “the IMF now recognizes that its program did not achieve the economic objectives it had set. The Ex-Post Evaluation of the Fund attributes much of the blame to the Macri government. “
Finally, he warned that “if the course were reversed with antiquated austerity requirements to Argentina (…) it could threaten world political and financial stability. In the end, everyone would lose.”
The Argentine government is working against the clock to be able to advance in a new financing program with the IMF, with the explicit objective that the fiscal pattern does not affect the current recovery of the economy.
Regarding the expected maturities for the first months of the current year, between the end of January and the beginning of February, Argentina will have to pay between interests and surcharges around 1,655 million dollars.
The negotiation between the parties involves refinancing the almost 45,000 million dollars contracted during the administration of Mauricio Macri, of a failed stand-by program, where only in 2022 Argentina is obliged to pay about 19,000 million dollars.
The next capital maturity will be at the end of March, the time of the year that marks a deadline for the renegotiation of Argentina’s debt with the Paris Club.
On the other hand, this Monday it was reported that the British economist of the International Monetary Fund, Ben Kelmanson, will begin this week to work at the head of the agency’s Buenos Aires office, replacing the Jamaican Trevor Alleyne.
Kelmanson is an economist with 22 years of experience at the Fund, he has worked “on a variety of issues at the global and regional levels and on the institution’s policies for advanced, low-income and emerging economies,” as detailed by the IMF after the appointment. .
For the past three years, the economist served as the body’s permanent representative in Turkey.
Kelmanson will work directly under the orders of the Brazilian economist Ilan Goldfajn, who last week took over as the new director for the Western Hemisphere at the International Monetary Fund, a position vacated by Mexican Alejandro Werner.
