How will the government pay the 2,700 million dollar installment to the IMF within 5 days?

The calendar of debt maturities works, beyond the principle of agreement that the Ministry of the Economy has reached with the technical team of the International Monetary Fund this week, and indicates that between Tuesday and next Wednesday the government should go to Washington for a few $2.7 billion as an interest with the organization. There is a certainty that they have in official offices: the payment will not arrive of the IMF before that date.

The resolution of the staff negotiations took place on Sunday evening and was announced on Monday. At the Ministry of Economy, they acknowledged on the same day that the preparation of the technical team’s full report, its submission to the board, its discussion and final approval is a process that it will take a few weeks.

The calendar shows that between March 21 and 22 payments should be made to the Monetary Fund for $916 million there $1.77 billion, respectively. This is the example of repayment of the most expensive Stand By 2018 credit of this first quarter of 2023.

In general, program disbursements Extended Fund Facility (EFF) are organized in such a way that “match” with deadlines of each quarter. It even provides that the last part of each quarterly target review, which is the stage that the economics team and the IMF are currently going through, coincides with the payment date of the highest amount of the quarter.

But the negotiation dragged on in such a way that now the times allow us to count on the time with the disbursement – which should be close to the $5.3 billion once council gave the green light to start according to staff- so a window was opened with two possibilities face the payment without arrears with the agency, according to Palacio de Hacienda sources.

The first is to pay the $2.7 billion with the current reservations. With exchange levels at the Central Bank at critical levels, with daily sales by the monetary authority (some came out $1.7 billion so far this year) and in the midst of the drought which has capped the chances of collecting foreign currency from the coffers very low, it appears to be a difficult variant, beyond the fact that a few days later this exit from dollars maybe plywood with the disbursement, once the advice gave the green light to Washington.

The other option, which the economics team says is being analyzed, is negotiate with the IMF that the expiration of March 21 and 22 can be postponed a few days – not beyond the last day of March – so that the transfer of dollars from the Monetary Fund can arrive on time And with those currencies, that economy turns around and returns the $2,700 million to the organization.

After the agreement with the staff, the prospect of accumulation of reserves it will be less demanding in 2023 due to the macroeconomic impact that the severe drought which affects agricultural production.

As reported by Economía, the quarterly reserve target will be reduced by approximately $3 billion and the annual, in about $2 billion. For the moment, the IMF has not given details on this central point.

“As stronger macroeconomic policies and efforts to ensure better reserve coverage and reverse recent exchange rate losses are expected, a change in reserve building target net international by 2023,” the staff said.

“This will partly take into account the increasingly serious impact of the droughtwhile taking into account the offsetting effects fall in import prices energy and agreed policy measures. It is requested that the majority of this accommodation be made early 2023in line with the anticipated impact of the drought,” the IMF technical team said.

The agreement was that monetary authority dollars cannot be used to effect debt buybacks in foreign currencies, which does not mean that the redemption process has been prohibited.

There will also be another restriction on the use of reserves: they cannot be used for intervention at the price of parallel dollars such as Cash with Settlement or MEP. “That not to do with reservationsit’s not a problem”, they defended themselves to the economic team.

Another element that led to the conclusion of the showdown between the government and the IMF is the possibility of a new soybean dollar. The Fund, by law, does not accept the practices of multiple exchange rates as a regime of this nature would be. In the last staff report, he even advised against a third edition of this measure, considering that it could “stop being effective”. He had also acknowledged that he had served the executive branch to meet its reserve targets last year. In the end, this last criterion prevailed and the agreement could open the door to the repetition of this type of measure.

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