The International Monetary Fund (IMF) approved the second review of the debt agreement with Argentina that the government of Mauricio Macri took, and once the Board of Directors of the organization puts the final signature on that “examination”, the country will access the corresponding disbursement of 3.9 billion dollars. In any case, as this procedure may take a few days, Argentina will pay this week with reserves from the Central Bank (BCRA) the 2,622 million maturities for the period (895 million of which are due on Wednesday, 1,727 million on Thursday).
The approval of the second review is not only the positive evaluation of the results as of June 30 last (closing of the second quarter) but also reflects the agency’s positive evaluation of the policies applied in recent months. This was made clear in the negotiations that the economic team led by Minister Sergio Massa carried out during his last tour of the United States, where he presented the numbers of the national economy in front of the leadership of that multilateral organization, the US Treasury and other entities. international.
Through a statement, the agency detailed that “the technical staff of the IMF and the Argentine authorities have reached an agreement at the level of technical staff on the second review under Argentina’s 30-month SAF agreement. The deal is subject to approval by the IMF’s Executive Board, which is expected to meet in the coming weeks. Once the review is complete, Argentina would have access to around US$3.9 billion (SDR 3 billion).”
And he added that “recent and decisive policy measures aimed at correcting previous setbacks (…) are helping to restore confidence and strengthen macroeconomic stability, including by rebuilding international reserves.”
Reservations and prices
The IMF statement highlighted that the latest review of the agreement evaluated the progress of the first review and updated it in the current macroeconomic framework. On this basis, it was analyzed “reaching agreements on a strong policy package to continue strengthening macroeconomic stability and ensure sustained and inclusive growth” of the country.
At this point, he made a prediction about improvements in the Central Bank’s international reserves: “Net international reserves are expected to increase by 9.8 billion dollars during the course of 2022/23,” he stressed. In addition, he anticipated a “gradual moderation” of inflation towards the remainder of 2022 and all of 2023. “Although inflationary pressures remain strong” due to the international context, “a gradual moderation is expected”, which results in a ” reduction of uncertainties.
This prognosis was given not without acknowledging a setback. Although “most” of the objectives as of June this year were met, there was a problem with net international reserves “due to a growth in the volume of imports higher than programmed and delays in external official support.” Added to this was the “period of volatility” in the exchange rate during the market coup in June and July, which, however, “was stopped after decisive measures that corrected previous setbacks and rebuilt credibility.”
No Change Agreement and Fiscal Policy
The IMF determined that the general objectives of the agreement with Argentina “will remain unchanged until 2023” and that the axes will continue to be “fiscal order and the accumulation of reserves.” In this sense, he stressed that “in the context of decisive actions by the new economic team, market pressures are dissipating and the growth outlook remains unchanged at 4 percent for this year, before moderating to the potential rate of 2 percent from 2023.
There was also praise for Sergio Massa’s administration: “In the context of decisive actions by the new economic team, market pressures are dissipating and the growth outlook remains unchanged at 4 percent for this year, before moderating to the potential rate of 2 percent from 2023,” they explained.
“On the fiscal policy front, the program provides for meeting a primary deficit target of 2.5 percent of GDP in 2022 and 1.9 percent of GDP in 2023, as highlighted in the budget bill. recently presented” reads the statement and highlights that these improvements are the product of the following points:
- “A better targeting of energy, water and transport subsidies”
- “A new prioritization of spending to ensure the execution of critical investment projects and the adequate protection of poor households”
- “Strengthened spending controls, which in turn should help contain spending arrears”
- “Efforts to review corporate tax incentives and strengthen revenue compliance.”