He International Monetary Fund (IMF) gave the green light to the transfer for US$ 4.7 billion agreed with the government of Javier Milei, the amount entered the coffers of the Central Bank and Argentina paid a commitment for almost USD 1,967 million which expired this Wednesday, January 31.
In this way, the ruling party guarantees greater robustness in the international reserves of the monetary authority, which escalated US$ 2,527 after payment to the IMF. At the same time, the resources will be enough to clear the disbursement scheme that it has with the multilateral organization until April.
The IMF corrects its estimates: fall in GDP and growth in inflation while the Government seeks a fiscal surplus
In effect, the Argentine government will have to cancel On Thursday, February 1, another commitment with the Fund for US$ 840 million in interest. Contrary to what happened with previous maturities, which were capital, this cannot be kicked until the end of the month.
The disbursement of the financial entity was approved after the board meeting, which was scheduled for today, within the framework of the seventh review of the Extended Facilities Program and crystallizes the good harmony with La Libertad Avanza.
In mid-January, a mission commanded by Luis Cubeddu and Ashvin Ahuja arrived in the country in order to hold a series of technical meetings with officials from the Ministry of Economy and the Central Bank.
The IMF team had stated that the current program “severely deviated from its course” and “The primary fiscal deficit and internal debt goals for the end of September were not metand preliminary data suggests that year-end goals were missed by an even greater margin.”
The IMF Board approved the disbursement of 4.7 billion dollars
The Executive Board of the International Monetary Fund (IMF) completed the seventh review of the expanded agreement this Wednesday and enabled the disbursement of US$4.7 billion (announced by Luis Caputo at the beginning of January) in order to “support the initial political efforts of the authorities and the strong commitments to restore macroeconomic stability.”
“The Board’s decision allows for an immediate disbursement of around US$4.7 billion (or SDR3.5 billion) for support the authorities’ initial policy efforts and strong commitments to restore macroeconomic stability and help Argentina meet its balance of payments needs. This brings total disbursements under the agreement to approximately $40.6 billion,” IMF officials said in a press release.
The Executive Board considered upon completing the seventh review that the main objectives of the program set until the end of December of last year “were not achieved by wide margins due to serious policy setbackswhich required approval of non-compliance waivers.”
The Board approved a extension of the agreement until December 31, 2024as well as some rescheduling of planned disbursements within the existing amount of the program.
FMI. Foto: Shutterstock
Kristalina Georgieva criticized the “inconsistent policies of the previous government”
At the conclusion of the Executive Board debate, Kristalina GeorgievaManaging Director and President of the organization, made the following statements:
– “Following the completion of the latest reviews, Argentina’s already large imbalances and distortions worsened and the program deviated significantly, reflecting the inconsistent policies of the previous government. Amid this difficult legacy – high and rising inflation, depleted reserves, and high levels of poverty – the new administration is taking bold steps to restore macroeconomic stability and begin to address long-standing impediments to growth. “These initial measures avoided a balance of payments crisis, although the path to stabilization will be difficult.”
– “The ambitious agreed stabilization plan focuses on establishing a strong fiscal anchor that ends all central bank financing of the government. Achieving a primary fiscal surplus of around 2 percent of GDP this year will be underpinned by a combination of temporary import-related taxes and strengthening fuel taxes, along with efforts to rationalize energy subsidies and transportation, administrative costs and lower priority policies. discretionary spending. Social assistance is also being strengthened to support the most vulnerable and safeguard the real value of pensions. “Over time, higher-quality fiscal measures are planned to achieve structural improvements in revenue and spending and ensure consolidation and more equitable burden-sharing.”
Kristalina Georgieva. Photo: Telam
– “After the realignment of the exchange rate, exchange rate policy should continue to ensure reserve accumulation objectives. Important steps are being taken to address the large trade debt overhang and create a more transparent and rules-based import system. “Furthermore, the authorities have committed to eliminating remaining distortive exchange rate restrictions and multiple monetary practices in the near term, and to developing plans to gradually dismantle capital flow management measures, as conditions permit.”
– “The monetary policy stance should evolve to support money demand and disinflation, while the monetary policy framework and operations will be adjusted to strengthen its anchoring role. “Continuing to strengthen the central bank’s balance sheet remains a priority.”
The IMF would postpone the last review in 2024 to give Milei more time to apply reforms and reach surplus
– “Efforts are underway to correct large and extensive relative price imbalances, reform the energy sector and create a simpler, rules-based and market-oriented economy. Barriers to growth, formal employment and trade are being addressed, while a more predictable regulatory framework is envisioned to boost investment and unlock Argentina’s energy and mining potential.”
– “Agile policy formulation and contingency planning will be essential, and additional measures may be needed to ensure program objectives and restore stability on a lasting basis. Clear communication and well-targeted social assistance, as well as continued efforts to generate social and political support for the programme, remain essential.”
Luis Caputo, Nicolás Posse and the authorities of the organization. Photo: NA
The new goals agreed with the IMF
After the visit, the Minister of Economy Luis Caputo noted that the parties had not reached “a new agreement” to repay the loan for US$ 44,000 million but “it has been “refloated the previous agreement that was down due to non-compliance with goals”.
“Refloating this agreement required a greater commitment to compensate for loss of credibility occurred in the last two quarters,” said the head of the Treasury Palace at a press conference.
According to Caputo himself, an agreement was reached with the Monetary Fund primary surplus target of 2% of GDP after the financial deficit 6.1% registered in 2023, product of the sum of a primary deficit of 2.9% y debt service interest of 3.2%. Simultaneously, the parties agreed to accumulate international reserves of US$10 billion in 2023.
Javier Milei and Kristalina Georgieva.
The Central Bank broke the buying streak
On the other hand, the BCRA broke a buying streak of 33 consecutive days by selling US$ 10 million in the Single and Free Exchange Market (MULC) during this Wednesday, January 31, closing the month with purchases for US$ 3,273 million.
According to financial market sources, since December 13, the BCRA acquired US$6,135 million and gross international reserves jumped from US$21,017 million to US$ 27,635 million at the close of the day. The access of importers to the MULC led to greater selling pressure for the monetary authority.
MFN