The Government is not sure when it will be able to approve a new program with the IMF. This explains the premature announcement of the 2025 Budget.
If anything was clear this Sunday with the presentation of the 2025 Budget, it is that The Government is not clear when it will be able to have a new program approved with the International Monetary Fund (IMF). This is the genesis of the fiscal rule introduced by President Milei. In this way, the president and his entire economic team will change in the coming months the usual “quarterly goals” of a virtual program like the Extended Fund Facility (EFF), for a rule that puts the payment of debt interest first and then allows some kind of discussion for the rest of the expenses.
The reader should think of a prototypical investor. He needs some signal to maintain his holdings in Argentine sovereign fixed income. And that signal, usually, are the IMF’s quarterly reviewsthe ultimate guarantor of oversight of public accounts and the effectiveness of the economic plan underway. Without such monitoring, markets are likely to become skeptical and country risk will return to levels that are unsustainable for any promise of refinancing. That is why Milei’s forced gesture is understandable when announcing a budget with few data tied to realitybut with a forceful promise of adjustment based on debt payment.
The lack of dollars, a problem when it comes to negotiating
The government is afraid of a market reaction. The lack of dollars to pay the debt has triggered efforts to close a loan abroad that will secure the first disbursements that must be made at the beginning of 2025. The economic team is in these talks. Also, and perhaps more emphatically, The Ministry of Economy is currently working hard to close a refinancing of a large part of this debt. against new issues. There are more than US$5 billion in maturities that could cause shocks in the financial dollar market if they are not properly attended to in advance.
Ultimately, the promise of fiscal balance contained in the presentation of the budget presented by Milei could also have another purpose, a shot in the air, for show Washington the degree of commitment of the Casa Rosada.
Everyone to the United States, to protect the first payments
Over the next six weeks, the full economic team together with the head of the Central Bank, Santiago Bausili, He plans to travel to the United States to strengthen efforts in two different directions: on the one hand, to explore the possibility of advance negotiations with the IMF. On the other hand, look for credits with financial institutions.
Next week, Luis Caputo will travel with Javier Milei on his visit to New York to participate in the UN General Assembly. A high-level meeting is not ruled out, although the negotiating table is still in Washington, where both Luis Cubeddu, deputy director of the Western Hemisphere department of the IMF, and Ashvin Ahuja, head of the Argentine mission, have their offices. According to information obtained by Scope, Cubeddu has already thought that the structure of the new agreement with Argentina should be another EEF. Of course, the conditions will have to be negotiated.
Source: Ambito
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