What are the important points
1. The economic perspective
According to Chodos, Argentine representative before the International Monetary Fund, Some of the most important points are related to Argentina’s economic outlook in 2022 and at least until 2024: “we are discussing, among other things, the fiscal path, growth projections, projections from here to several years of collection, type of change, etcetera, “he explained. The reference that will be taken into account is the 2022 Budget. According to the project presented to Congress and which is waiting to be approved after the legislative elections, it is expected that as soon as at the nominal exchange rate, it will be $ 131.10 next year. At the same time, the project estimated in terms of debt, payments over $ 1.1 trillion that do not include maturities with the IMF. It is expected to agree on a payment schedule of at least ten years.
2. Growth
“Argentina has to defend Argentina and the future of the Argentines. The important thing is to have a program in which one is certain that it is not going to generate a new recession and it is not going to eliminate this growth. The important thing is to focus on which path is consistent with a consistent recovery that allows us to grow out of this problem, ”said Chodos.
Another point to take into account is related to growth. There are several estimates to take into account. The World Bank projects growth for Argentina of 7.5% in 2021 and a slowdown to 2.6% next year, in a context of global recovery after the pandemic. The International Monetary Fund (IMF), for its part, improved its growth forecasts for the Argentine economy, since it foresees a recovery of 7.5% for 2021 and 2.5% for 2022. It is less than what the Government anticipated, which forecasts that the economy will grow 8% this year and 4% in 2022. Growth is key to the agreement since it is what will allow Argentina a boost in the economy and will give greater credibility to the ability to pay the debt.
3. Fiscal Deficit
It is one of the most important points and on which the IMF places the greatest emphasis. Argentina met some goals in a positive way to reach an agreement and generate confidence in creditors about its economic policy. One of them is that 2021 will end with a lower fiscal deficit than expected in the Budget for the current year. According to an estimate by the Mediterranean Foundation, the primary deficit would stand at 3.6% of GDP compared to the Budget estimate that forecast 4.2% (This would imply a reduction of 0.6 pp). Compared to 2020, the year of the full pandemic, Argentina had a primary fiscal deficit of 6.5% of GDP, as a result of higher social spending by the State to safeguard the different sectors in times of crisis.
According to these data, Argentina has been gradually reducing its primary fiscal deficit and plans to continue on the same path by 2022. However, the reduction in 2022 will be less than this year: in the 2022 Budget, a fiscal deficit of 3.5% is expected, which would imply a decrease of 0.1p.p. This is a point that the IMF will seek to negotiate for Argentina to reduce its spending perspective a little more.
4. Fiscal surplus
One of the arguments that would explain the delay in reaching an agreement would lie in the level of surplus to which Argentina must converge. A modification that was known at the beginning of this year, through the Report “New framework for the Sustainability of the Debt” (Review of The Debt Sustainability Framework For Market Access Countries), suggests that the Fund will also consider the quasi-fiscal deficit in the analysis of the debt of the countries.
In this sense Ambit he asked Nigel Chalk, acting director of the Western Hemisphere Department, if “the IMF was going to incorporate the quasi-fiscal deficit of the BCRA into the new agreement.” Chalk asserted that “It is one of the issues that has been worked on during the discussion with the Argentines, I do not want to anticipate what was discussed, but it is something we are seeing.”
Before this modification was known, in the Fund’s analysis, the work on Argentina estimated that it should converge to a surplus of 1.5% at a certain time, but this goal was without including the quasi-fiscal deficit of the BCRA. The point is not less because when including the debt of the BCRA this implies an increase in the imbalance. To get an idea of the magnitude, according to Ecolatina’s calculations, the quasi-fiscal deficit represents 3% of GDP. It should be noted that the debt between Leliqs and Active Passes is 4.4 trillion pesos.
“The stock of debt in unpaid liabilities of the Central Bank grows bidding after bidding, and already represents 140% of the monetary base. With this, the interest burden increases, which would rise more than 70% in 2021 ”, says the work of Ecolatina.
He adds that the issue is worrisome since “Even if the increase in spending was only temporary and the first of the imbalances were corrected, the increase in BCRA liabilities would not be reversed, generating a permanent increase in the quasi-fiscal deficit.”
5. Inflation
For the IMF, the program must clarify what will be the measures to be taken to gradually reduce inflation. “Certainly, inflation is an important issue in Argentina,” said Nigel Chalk, in the press conference he gave on the occasion of the presentation of the report “Economic Outlook for Latin America and the Caribbean.”
The only data on Argentina were consigned in the latest World Outlook report (WEO) where the agency predicts growth of 7.5% for this year and 2.5% for 2022. Projected inflation according to the 2022 Budget will be 33% . However, for this year when the government expected inflation of 42%, that goal will not be met. Chalk indicated with respect to Argentina that they see “multi-causal drivers of this inflation and we believe that expectations have been unmoored. We see that responding to that inflation will demand action on several fronts, given the different drivers of inflation on the macroeconomic side, and we also see that there is potentially a role for other policies, including income policies, to address that inflation. “
Source From: Ambito
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