Argentina, the largest debtor of International Monetary Fund (IMF)I would need once again to apologize, this time for not fulfilling the objective of accumulation of reservations of currencies included in the new agreement for US $20,000 million. It is likely to get it, according to analysts and former officials. The rest of the goals are fulfilled.
The agreement established economic objectives including eliminating the fiscal deficit, a decline in the inflation rate and the reconstruction of the exhausted foreign exchange reserves of the Central Bank, which were in red numbers when Milei assumed the position in the late 2023.
The Government has managed to decelerate inflation with harsh austerity measures and has guided the country to leave an economic recession but it has been more complicated to accumulate reserves, which would be below what required by the IMF.
However, former officials of the country and IMF said that Milei had done enough to gain some margin of maneuver, and that the spending cut managed to reverse years in which the country had an important fiscal deficit, conquering the support of the markets and obtaining the applause of IMF leaders.
“I think they will forgive it (breach of the reserves goal) even if they ask for more later,” Claudio Loser, former director of the IMF for the western hemisphere, told Reuters.
This would probably be completed in a “forgiveness” (or Waiver for its expression in English), approving the first review of the program, for which on Tuesday a technical team of the agency arrived in the country.
Daniel Marx, former secretary of Argentine Finance between 1999 and 2001, told Reuters that the next disbursement, about 2000 million dollars, would require the forgiveness of the IMF.
“Most likely, the disbursement is not automatic, but requires a waiver,” Marx said.
“It was thought that the Central Bank was going to intervene (in the change market) accumulating reservations. This did not happen, at least so far. I suppose they will say how they plan to face the coming months, more than anything, from here at the end of the year.”
The Ministry of Economy and Presidency did not respond to a request for comments.
The Central Bank declined to comment and said that the conversations with the IMF technical team were barely starting. A key factor for the “Waiver” is Milei’s solid history in terms of reducing public spending to eliminate the fiscal deficit. Last week, the government announced that it would deepen the adjustment to reach a surplus goal of 1.6% of GDP.
The Minister of Economy, Luis Caputo, said at the beginning of the month that the accumulation of reserves was no longer as important as before, with a greater flotation of the weight and a central bank capitalized and highlighted the support of the IMF to the reforms of Milei.
Aldo Abram, director of the Freedom and Progress Foundation in Buenos Aires, estimated that the country could be between US $ 45 billion YU $ S1000 million below the agreed reserves goal, but that should not block the disbursement of new funds.
“This government has demonstrated a great financial skill to solve problems. It may happen that we are $ 45 billion OU $ S41000 million below (of the reservation goal), they will not do big problems in the background,” Abram said.
By Eliana Raszewski, from Reuters Agency
Source: Ambito
