As the Executive had already anticipated, the guidelines in fiscal, monetary and reserve accumulation matters were exceeded in the first quarter, which was the period under analysis in this audit. This was reported by the IMF last night.
“In the coming weeks, the review will go to the IMF board for approval. Once this review is completed, Argentina will receive some US$4,030 million (equivalent to 3,000 million SDR)”, they explained in the Government. With these resources, a maturity of 2,000 million SDRs (about US $ 2,690 million) scheduled for June 21 and 22, corresponding to the multimillion-dollar loan contracted by Macri, will be canceled.
Within the framework of the extensive agenda of meetings held by Argentine officials and the Fund’s staff during the last few weeks, it was agreed to keep the annual objectives established in the approval of the agreement unaltered. That is, the net reserve accumulation floor of US$5.8 billion, the primary fiscal deficit ceiling of 2.5% of GDP, and the treasury monetary financing ceiling of 1% of GDP.
These guidelines had been questioned by numerous analysts. The maintenance of it, with quarterly recalibrations, is a sign of certainty that Martín Guzmán seeks to give with the intention that this will help anchor the expectations of economic agents in a context of growing inflation. “It is essential to strengthen stability and support the ongoing economic recovery,” said the agency’s statement.
“The technical staff of the IMF and the Argentine authorities have agreed that the annual objectives established in the approval of the agreement will be maintained, specifically those related to the primary fiscal deficit, monetary financing and net international reserves. Such an approach provides an anchor for economic stability and growth in times of uncertainty,” said Julie Kozack, deputy director of the Fund’s Western Hemisphere Department.
The US economist said that “the external shock associated with the war in Ukraine is expected to have a limited impact on growth and the balance of payments in Argentina this year, but – as in most other countries – the increase in world commodity prices has already caused higher inflation.” He added: “Despite the recent increases in energy tariffs, Argentina’s fiscal position is also being affected by the shock of commodity prices due to an increase in energy subsidies and an adequate expansion of support. targeting low-income households.
In this sense, the Government promised to reorient policies to comply with the annual goals agreed with the IMF, although it was agreed with the organism to modify the quarterly objectives of accumulation of reserves and primary deficit.
“While addressing the impact of the shock, the Argentine authorities are committed to implementing policies to achieve the program’s annual objectives of primary fiscal deficit, monetary financing and reserve accumulation. Regarding fiscal policy, the authorities plan to reorient public spending to achieve the primary fiscal deficit target of 2.5% of GDP by 2022, and at the same time reduce monetary financing to 1% of GDP, as planned in the approval of the agreement,” Kozack said.
And he added: “They have also reaffirmed their commitment to continue applying the monetary and exchange rate policy framework to achieve positive real policy interest rates, ensure the competitiveness of the exchange rate and support the accumulation of reserves of US$5.8 billion for all year. Taking into account the initial impact of external shocks and seasonal spending and import patterns, it is proposed to modify the year-on-year quarterly targets for the primary fiscal deficit and reserve accumulation, keeping the program’s annual targets unchanged.
Going forward, Kozack said, “decisive policy implementation will be critical to ensuring program goals are met.” And he stressed that this also includes “taking measures to mobilize net domestic financing in pesos, improve the transmission of monetary policy, reduce tax evasion, strengthen the AML/CFT framework and encourage investment in strategic sectors.”
Source: Ambito
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