The month of May was the goal desired by the Government to close an agreement with the International Monetary Fund, but that objective began to fade as time passed and the official needs in an electoral year did not agree too much with the adjustments that the organism. But in Washington they estimate that the Fund is not in a hurry to reach an agreement either: They aim that the one signed be a durable program that can be implemented, with internal consensus, a requirement that is undoubtedly complicated by the legislative elections in October.
Consulted by Clarion, A spokesperson for the Fund said briefly that “very constructive” conversations with the Argentine authorities continued while the Government works to design an economic plan “that can be supported by a Fund program” and in “Build broad support for the policies that would underpin such a program”.
And he recalled recent words from the managing director, Kristalina Georgieva, that “reaching an agreement in May will require more efforts from both parties.” That month is when a debt with the Paris Club is due and a program with the Fund is desirable first.
The Government seeks to sign a new Extended Facilities agreement, which has repayment terms of up to 10 years, in replacement of the Stand By of 57,000 million dollars that was granted in 2018 (44,000 disbursed), which had 5-year maturities today considered unpayable.
An idea that has been fed in recent weeks by the vice presidency of Cristina Kirchner is to seek that the Fund double the payment term so that the next agreement stretches to 20 years. However, this measure does not seem to have a chance of succeeding, Beyond political will, by the Fund’s own bureaucracy.
In this regard, the IMF spokesperson cited the regulations: “Disbursements as loans from Extended Facilities must be paid in a term of between 4 and a half to 10 years in 12 semi-annual payments. These deadlines are applied in a uniform way to all countries ”.
To change these parameters, which have never been modified since this instrument was adopted in 1974, the members of the Executive Board should vote to directly modify the rule. not only for the Argentine case but for all the members of the organization, something that in Washington is estimated to be very unlikely to happen.
Hector Torres, who was an Argentine representative in the Fund, told Clarion there could be another option: “Two Extended Facility Agreements, (10 years each), one after the other. The question is: Do we want to live 20 years under IMF programs? “
Analysts who follow the Argentine case in Washington understand that there is ongoing a process of recovery of the Argentine economy, partly generated by favorable external circumstances such as the international increase in the prices of raw materials and also the weather, which will bring a good harvest in March and April that will generate fresh dollars.
In addition, they admit that there is a small recovery in reserves and that the exchange pressure has recently decreased thanks to certain actions of the Government such as the rise in interest rates and also due to a lower fiscal deficit than expected (6.5% instead of 8 ,5%).
Nevertheless, there are alerts for inflation, which is believed to be the focus of the Fund’s attention now. In Washington they consider that prices rise due to macroeconomic imbalances, the deficit and the emission. And that, although the Government is working on certain policies to contain it, everything is subject to the electoral environment and, above all, to the search for internal consensus in a difficult year.
In this context, the agreement with the IMF is delayed. There are no substantial differences between the parties in policies but in what is the balance between reducing inflation and supporting the recovery. If fiscal adjustment or emission reduction should be more accelerated processes
It is considered that, although difficult, May is still a possible goal to reach an agreement, even a more favorable climate for consensus may emerge when the effects of the liquidation of the April and May harvest are seen. But that is unlikely to do so.
As estimated in Washington and Buenos Aires, the IMF and the government would be discussing structural reforms fundamentally in four areas: fiscal consolidation (deficit, subsidies); capital market development; measures to increase agro-industrial productivity (regulations that provide a predictable framework for investments) and on governance issues, such as improvements in public sector management, money laundering issues, and others.
Designing and agreeing on these reforms takes time and requires slow work from society. Analysts believe the Fund would seek to give small steps. Slowly build those changes to go in the right direction. There is no rush to close: the ideal would be a good agreement that the government can implement. They won’t rush if you can’t. Better to be patient and sign something that can be met.