A default with the IMF would trigger devaluation expectations and widen the exchange rate gap between the official dollar and the alternative dollars, driving inflation even more. In addition, it would produce a run on the reserves of the Central Bank, on deposits in dollars and an additional run on deposits in pesos.
In the functioning of the real economy, a default with the IMF would cut off all types of financing in dollars, not only for companies in financial terms, with the possibility of placing debt abroad, but also commercial credit. For example, to import a screw, it would have to be paid in cash immediately, companies that have to make large investments would also be harmed since they need access to credit, therefore, that would generate a very large restriction of foreign exchange and imports that would cause not only a shortage in many sectors of the economy, but also a new recession.
Likewise, an agreement at the beginning of the year would mean that the expectations for 2022 regarding GDP growth do not decline over time. For all this, reaching an agreement with the financial institution is extremely important.
As of March 2022, Argentina must pay the IMF a maturity of 2,821 million dollars. Already in December 2021, the country paid a sum of 1,858 million dollars with the special drawing rights that the fund itself had sent to Argentina in August.
The President of the Nation, Alberto Fernandez, and the Minister of Economy, Martin Guzman, hope to agree in March that it is the month in which the first large payment of the debt of 44,000 million dollars contracted with the IMF during the government of Mauricio Macri. Guzmán, in an interview with the Spanish newspaper “El País” was cautious, since nothing is defined at the moment, but he maintained that they are working hard on it: “It is necessary to obtain all the international consensus that is needed to be able to have an agreement between both parties.”
That is why an agreement with the IMF would allow Argentina to start a path of growth and sustainable development over time. It should be noted, that our country had to face a pandemic without the possibility of accessing international credit and for this reason, public spending due to Covid-19 was financed mainly with monetary emission that translated into an acceleration of inflation.
Time is short despite the fact that negotiations are underway. The agreement must be closed as soon as possible, otherwise the interests will be greater and the government will have to further cut the budget in other areas.
Source From: Ambito
