Revision and change of objectives: the details of the negotiation with the IMF and the rest of the program

Next Monday, the technical staff of the International Monetary Fund dedicated to the negotiation and monitoring of the current agreement with Argentina will formalize a revision of the reserve objectives. passed it GlobeLiveMedia this morning and then the confirmation came.

Both the members of the economic team accompanying the Minister Sergio Massa at the meeting of G20 ministers and central bankers in India, as negotiators in Washington agreed with the Fund to revise reserve targets for this year ($5.8 billion were to be added in net terms), taking into account the impact of the war in Ukraine and, in particular, of the drought.

It is not, explained senior sources of the economic team who preferred not to specify the new objectives, which the IMF will announce in Washington, of a “to renounceror waiver of targets, but rather a revision of the agreement in the specific part of the reservations for 2023, for which the approval of the organization’s board of directors is not required.

The review will take into account quarterly and annual targets, again in terms of reserves. But there will be no change to the fiscal and monetary targets, which the economy and the Fund see as an “anchor point” of the deal.

The priority of the economic team, working in tandem with Massa and those accompanying him in India, as well as the technicians who are in Washington, was “to adapt the program to reality”, taking into account both the impact of the war in Ukraine and especially and prospectively, that of the drought on the ground, production and agro-industrial exports of Argentina.

This way it’s his staff of the Fund, the one who negotiated and agreed to the new reserve targets, which will be disclosed on Monday, so that throughout the year there will be no need to constantly review them throughout the year. In the meantime, says the economic team, work is continuing on the fiscal order, the accumulation of reserves and the monetary order.

Massa held a meeting in the evening in Bangalore, India, with the director of the Fund, Kristalina Georgievaand his vice, the Indian economist Gita Gopinathin which they confirmed that the Fund would disclose the “staff-level agreement” on Monday, with approval for the fourth quarter 2022 review, which in turn will involve a disbursement of approximately $5,400 million to which the board of directors give the go-ahead though on March 22.

The new reserve targets take into account, above all, the drop in agro-industrial exports, due to the drought, and also incorporate the need for Argentina to manage the dollar to support the level of activity through the flow of imports, so as not to stifle the productive sectors most dependent on inputs and parts from abroad.

The economics team did not consider it “neither a victory nor a defeat” that the Fund had finally readjusted the reserve targets to “the new reality” of war and drought and sees this as proof of the realism of the program.

As to whether Argentina could access the “Resilience Fund” created by the Fund to support countries affected by climate change, the Economy clarified that this source of resources will only be active from 2024.

“Our premises are to accumulate reserves to strengthen the currency and access to credit, restore fiscal order so as not to spend more than what is received and to have monetary order, because we see that Argentina in 2020 and 2021 had no external credit: it financed the pandemic and the exit from the pandemic with issuance and transitional advances. This had an impact on the currency and on the street. We are trying to sterilize what is accumulating in the city, not in the demand for money, but in other variables of monetary circulation,” a senior source from Massa’s team said.

In India, as GlobeLiveMedia reported, Massa received questions from Georgieva regarding the use of reserves to buy back bonds. But Economía reaffirmed its defense of the use of available instruments to stabilize the economy. “Some may be more or less favorable to the IMF and other economic actors. This may seem unorthodox to the Fund, but at the time, faced with so many guarantees, we had to demonstrate the ability to act against those who speculated too much,” the economics team stressed.

Economics, on the other hand, denied that the Fund, through its management or staff, is challenging the level of the exchange rate or promoting a devaluation. “We don’t talk about it; there is a very Argentinian fantasy that the staff pushes for a devaluation. If I did, I wouldn’t rethink the goals,” the source said. This type of speculation or version is promoted by those who need to profit from it, they say in Massa’s environment. they recognize is that the Fund does not agree with the existence of a multiplicity of exchange rates and raises the need to simplify the exchange system, which is a long-term objective anyway “Another thing is the rate of devaluation that some businessmen need,” the economics source said.

Regarding Argentina’s questioning of the Fund’s surcharge policy, the claim was reflected in the G20 Ministers and Central Bankers document.