Moody’s uploaded Argentina’s credit rating for economic reforms and IMF support

Moody’s qualification agency This Thursday went up the sovereign note of Argentina, to “Caa1” from “Caa3”, because he considered that Economic reforms and a new IMF program strengthen liquidity and relieve external financial pressures.

Moody’s ratings announced the Improvement of issuer grades in foreign and local currency of Argentina to reflect important changes in economic policy. The perspective was adjusted to “stable” from “positive”, indicating one Balanced risk assessment in the middle of current reforms.

“The extensive liberalization of change and capital controls, together with a new IMF program, supports the availability of liquidity in strong currency”Said Moody’s, who highlighted the positive effects of recent policy changes.

Normalization signals

Moody’s considered that the progressive elimination of exchange restrictions and the new weight of the weight of the weight are “A first step towards the sustainability of external payments.” He also valued the beginning of a disinflation process, the change in the fiscal and monetary anchor, and the reforms that seek to eliminate distortions and attract investment.

“The balance of the fiscal position represents a break with the long history of fiscal dominance and deficit financing by the BCRA”highlighted the report. For the qualifier, the growth of the Estimated GDP in 4% by 2025 confirms the recovery of the economy, although it warned that reserves are still low and structural obstacles persist.

IMF and Liquidity

The new agreement with the IMF – which foresees U $20,000 million disbursement in four years – was another key factor for the rating rise. Moody’s remarked that, unlike previous programs, the funds will not be used to finance fiscal deficit, but to sustain the balance of payments. To this are added US $ 6,100 million of multilateral banks that will also swell the reserves.

However, He warned that the accumulation of reservations so far depends almost exclusively on these extraordinary income, and not of an external structural surplus. The external balance, for example, is affected by the reactivation of domestic demand and broadcasting, which generated a lower commercial surplus and an increasing deficit in the balance of services.

Warning for the lack of genuine currency income

The stable perspective reflects a balance between the advances achieved and the risks that persist. Among them, Moody’s mentions the possibility that the liberalization process generates Macroeconomic tensions if it is not accompanied by genuine currency income, or that eventual political shocks affect the governance and continuity of the economic program.

The qualifier also focused on the assets of the Argentine private sector deposited abroad, estimated on U $ 200,000 millionas a possible source of financing for the future.

CEOLES AND STRUCTURAL CONTEXT

Moody’s also raised the country roofs: the local currency rose from B3 to B1and the foreign currency of Caa1 to B2. The decision was based on a greater institutional predictability and a lower state intervention in the economy and the financial system, although a “weak stability” of the balance of payments persists.

The agency maintained its lowest score (G-5) in governance, a reflection of decades of inconsistent fiscal and monetary policies. He also pointed out environmental and social challenges, such as the climate impact on agriculture and high levels of poverty and labor informality.