Meanwhile, the IMF estimates that global growth will moderate this year, going from almost 6% in 2021 to 4.4%.
“Growth is slowing as economies grapple with supply disruptions, higher inflation, record debt and persistent uncertainty,” said economist Gita Gopinath, deputy director general of the agency. “The global economy enters 2022 in a weaker position than previously expected,” says the IMF.
Presumably, this diagnosis is taken into account by the staff in the negotiations with the team chaired by Martín Guzmán, since, as Gopinath acknowledged, “we understand that the socioeconomic situation is challenging, that is why we are adopting a flexible and pragmatic approach”, pointed out the economist, referring to the Fund’s vocation to reach an understanding. And, in this regard, he added: “we hope to make even more progress in the coming days” in reference to the negotiations.
The truth is that Ámbito was able to know that there were intense virtual conversations throughout the weekend between the agency’s staff and Martín Guzmán’s team.
“The difference we have with the IMF is the speed of fiscal consolidation and the combinations between expenses and income. We don’t want to penalize demand when the economy is recovering,” Guzmán recently told Le Figaro newspaper. The minister also argues that the primary deficit has been reduced, which (excluding debt interest payments) was from 6.4% of GDP in 2020 to 3% of GDP in 2021. In principle, the Fund would request a primary deficit of 2 .5% of GDP, against 3.3% for this year.
According to private estimates, there were almost 2 points of extraordinary income: 0.6% from the wealth tax, 0.9% from the SDRs granted by the IMF and 0.4% from the increase in withholdings thanks to the rise of agricultural exports. According to calculations made abroad, Argentina this year will have lower revenues from the agricultural sector (it is estimated almost US$8 billion less) and higher foreign exchange outflows (between US$3 billion and US$4 billion). by energy import.
“Next year it will be very difficult for the government to finance the deficit it estimates for this year,” comment analysts in the United States, “with which the adjustment will be much greater than projected.” For this reason, the Argentine government remains firm that the “adjustment” does not stop growth in a world that, as the IMF itself admits, will be challenging.
It should be remembered that this week Argentina must face a payment of more than US$700 million. The hardening of the official discourse against the Fund generated in the markets the fear that this payment will not be made. However, international analysts estimate that Argentina will finally comply with this obligation since it is “in the midst of negotiations”, as confirmed by Gopinath.
complications
“As monetary policy tightens more broadly this year, economies will need to adjust to a global environment of higher interest rates,” Ginopath said. And, in this regard, he warned that “emerging market and developing economies with large borrowing needs in foreign currency and external financing should prepare for possible turmoil in financial markets by extending debt maturities as much as possible and containing currency mismatches”.
It was noted that 60% of low-income countries are already over-indebted and “will find it increasingly difficult to service their debts.”
In this sense, it is recommended that “the G20 Common Framework should be renewed to more quickly comply with the debt restructuring, and the G20 creditors”.
Faced with a world that will face a “more limited fiscal space than before the pandemic and rising inflation,” the Fund suggests that “bold and effective international cooperation will therefore be essential.”
Meanwhile, there are six recommendations for the countries: health policies, monetary policy, preparation for stricter external financial conditions, fiscal policy, structural reforms and climate policies.
The agency itself recognizes in the chapter “Preparation for stricter external financial conditions” that “IMF loan agreements (precautionary or disbursement) can be an important support to soften the impact of shocks. But for countries with large financing needs and unsustainable debt, liquidity relief may not be enough. Although it does not mention it, it would apply to Argentina, which is renegotiating its debt.
For these cases, it calls for the “rapid implementation of the G20 Common Framework for debt treatment” while admitting that “progress in this matter has been too slow” and calls for “urgent improvements”.
Source From: Ambito
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