It is a refinancing of Macri’s debt. In other words, we ask the Fund for money to pay the Fund* the maturities of that loan and thus improve the profile of net maturities with respect to the unsustainable one that Together for Change left us and that Argentina can continue to grow.
This agreement is the only way to meet the commitments assumed with the IMF by the previous administration (since the IMF does not accept debt restructuring)
It will have 10 reviews and they will be quarterly with disbursements. The payment of the same will be between 2026 and 2034, earning 4 and a half years without sacrificing money from Argentina to pay debt in these two and a half years. The first disbursement from the IMF will be USD 9.8 billion
Without the new program, Argentina would not be able to face the brutal maturities agreed by Together for Change in the Stand By program: in 2022 about USD19,000 million and in 2023 about USD20,000 million.
All this that was achieved is unusual in the framework of a program with the IMF. An agreement was reached without adjustment policies and with an increase in real spending in all the years of the program. It allows a passable path for our country with greater predictability, certainties and vision of the future
MAIN 10 AREAS OF THE MEMORANDUM OF UNDERSTANDING WITH THE IMF
There will be a moderate and sustainable increase in spending with expansion in infrastructure, science and technology and policies to strengthen social assistance and transition from social plans to genuine employment
“As part of our balanced approach to fiscal policy, we are committed to maintaining positive real growth in spending and improving the efficiency and progressivity of spending, particularly in social assistance, science and technology, and public investment”
More funds for social inclusion
”We will continue to strengthen our social assistance mechanisms to optimally serve the most needy people, and we will focus on combating child poverty and redirecting aid to promote inclusion in the labor market, especially for women and skilled workers. low or insufficient
“In addition, efforts will be made to redirect social spending towards training and employment programs, and continue to strengthen budget systems to ensure that spending addresses gender inequalities”
More investment in public works and innovation
“We plan to continue increasing infrastructure investment to more than 2% of GDP in 2022 (from an average of 1% of GDP in 2018-20) and maintain this level throughout the program. This investment will focus above all on improving housing and health conditions in the poorest urban areas, and on reinforcing the country’s road, energy, digital and logistics infrastructure. In addition, spending on science and technology will be protected and expanded in order to promote innovation”
Retirements
The agreement does not foresee ANY PENSION REFORM, it only contemplates two paragraphs in the memorandums on the subject that say the following:
“Spending on retirement and pensions will be guided by the new updating mechanism adopted at the end of 2020”
“We will carry out and publish a study that describes the options and recommendations to strengthen the equity and long-term sustainability of our pension system, focused on certain special retirement regimes reached by Law 27,546 as well as on the mechanisms to facilitate the voluntary continuity of people’s working life
Virtuous reduction of the fiscal deficit, that is, it will be accompanied by real growth
“We have drawn up a multi-year fiscal consolidation strategy in which a primary deficit of 2.5% of GDP in 2022 has been set as a goal, which will be reduced to 1.9% of GDP in 2023, and to 0.9% in 2024 ”
Countercyclical fiscal policy
“If the actual revenues of the federal government (net of legally associated spending) were higher than programmed, we commit to take this opportunity to duly reduce the fiscal deficit as appropriate, or to ensure that our base fiscal target scenario is met in the future. event of an adverse external shock, and thus reflect our commitment to macroeconomic stabilization policies
Financing fiscal trajectory
“The planned fiscal path will be financed mainly through a strong expansion of the public debt denominated in pesos and the support of the international community, which will facilitate the total elimination of monetary financing of the deficit by the end of 2024”
Rates
Those who will contribute the most to the reduction of energy subsidies will be those sectors with the greatest ability to pay, while the rest of the users will have increases that will be below the rise in wages
It aims to achieve reasonable rate levels that can be applied with criteria of justice and distributive equity for public gas and electricity services.
These reviews will cover both residential and non-residential users and will contain proposals for exclusion, if applicable.
residential users
For residential users, the salary variation coefficient (previously called CVS) will be considered as an objective criterion, as established by Law No. 27,443, frustrated by the total veto imposed by the previous administration
Following a public hearing convened at the end of April 2022, the measures that trace a path for the 2022-2023 biennium will be promoted, a new tariff proposal with a subsidy segmentation scheme that focuses the efforts of the National State on those vulnerable users and with lower ability to pay, and encouraging the adoption of measures that promote the rational use of services.
The segmentation for the 2022-2023 biennium contemplates three levels:
users who will no longer be beneficiaries of the energy consumption subsidy based on their full ability to pay
beneficiary users of the social rate, for whom the total increase in their bill for each calendar year will be equivalent to 40% of the CVS of the previous year
For the rest of the users, the total increase in the invoice for each calendar year will be equivalent to 80% of the CVS corresponding to the previous year.
“A new subsidy segmentation scheme for residential consumers has been designed so that we can focus revisions of wholesale energy prices on those users who, based on objective criteria, have a greater ability to pay. Following all the institutional mechanisms, before the end of April, we will convene a public hearing with the proposal to eliminate electricity and gas subsidies, as of June 1 of the current year, to 10 percent of residential consumers with greater ability to pay
“The anticipated fiscal savings with the segmentation plan could reach 0.06 percent of GDP in 2022, and additional savings would result in 2023 as a result of the expansion of the segmentation plan”
Non-residential users
It contemplates the payment of the full rate for the Large distributor users (Gudi), and for the rest, a rate review will be carried out according to the proposal defined in the public hearing
Inflation
There is understanding that inflation is multi-causal and not just a purely monetary phenomenon as the previous government and the IMF at that time affirmed.
“The high and persistent inflation in Argentina is a multi-causal problem, the solution of which will require a multi-pronged strategy. Reducing inflation lastingly will require a comprehensive program of economic policies. An important pillar will be to have a fiscal and financing path that is sustainable and that effectively helps reduce central bank financing of the budget without delay. It will be essential to complement this with a prudent and proactive monetary policy to support the demand for assets in pesos and with voluntary price and income policies to face the challenges arising from the strong inertia of inflation and the de-anchoring of expectations of the dynamics inflationary”
Careful income and pricing policies
“In mid-January, a new voluntary price agreement (Care Prices) was signed with more than 150 private sector participants, so that price increases do not exceed 2% per month in 1,300 representative products of the mass consumption basket. These price agreements will be an important complement to existing wage agreements to support real wage growth. Our revenue and pricing policies will be updated based on circumstances to deal with inertia and to guide expectations about future inflation dynamics.”
Exchange rate. There will be no exchange jump
“We will calibrate our management of the exchange rate to guarantee the competitiveness of the real effective exchange rate in the medium term, and we will encourage the accumulation of reserves. To this end, and to help meet the reserve accumulation targets under the program, the official exchange rate adjustment rate will keep the real effective exchange rate in 2022 broadly unchanged relative to interest levels. 2021 in order to preserve competitiveness”
Growth and resilience policies
“Growth-promoting reforms will be critical to begin to address long-standing bottlenecks and lay the foundation for more sustainable and inclusive growth”
Policies that promote growth and resilience will seek to stimulate:
- expansion and diversification of the tradable goods sector
- investment and productivity
- local and regional economic development
- formal employment and labor inclusion
- improvements in the efficiency and sustainability of the energy sector
- climate adaptation and mitigation policies
- the broader development of capital markets.
Interest rate
A framework was agreed that aims to have a structure of positive real interest rates, in order to strengthen the demand for assets in our currency and contribute to exchange and financial stability.
“The BCRA will seek to maintain a positive effective monetary policy rate in real terms, maintaining consistency with a sustainable path for BCRA securities. When determining the real interest rate, coincident and prospective inflation indicators will be taken into account, which will be updated monthly, in communication with the IMF’s technical staff, also taking into account other factors, such as the evolution of reserves. This will help ensure that, going forward, interest rates on bank time deposits remain positive in real terms, in order to support the demand for deposits in pesos and the development of an internal market for government securities.”
Source: Ambito
David William is a talented author who has made a name for himself in the world of writing. He is a professional author who writes on a wide range of topics, from general interest to opinion news. David is currently working as a writer at 24 hours worlds where he brings his unique perspective and in-depth research to his articles, making them both informative and engaging.
