Martín Guzmán explained that the agreement implies a new program with the IMF for two and a half years

Martin Guzman (REUTERS/Agustin Marcarian)

On the verge of debt maturity, the Government announced an agreement with the International Monetary Fund to refinance the USD 44,000 million of the program signed in 2018. In a press conference, the Minister of Economy Martin Guzman and the chief of staff John Manzur explained the keys of the new program.

The understanding implies a new two and a half year program during which the IMF will make quarterly reviews of the agreed goals and disbursements of money that Argentina will use to cancel the stand by contracted by the government of Mauricio Macri and strengthen the reserves. Then there will be a 10-year period to pay off the refinancing, starting in 2026.

The main points of the new scheme with which the State will seek to pay the debt with the international credit organization:

– Duration of the program: Guzmán clarified that the program will be a Extended Fund Facility (EFF) that It lasts for two and a half years.. During this first period, the IMF will “cover” the maturities established in the stand by signed in 2018 by the Government of Mauricio Macri. In 2026, that 10-year term would begin to run for the country to return the amount.

– Fiscal goals: will include a fiscal deficit reduction path. For the year 2022, it foresees a deficit of 2.5% (from the 3% with which it started the year); in 2023 of 1.9% and 2024 of 0.9% to reach zero deficit in 2025.

Message from President Alberto Fernández on the debt negotiation with the IMF

– Monetary issue: There will be a gradual reduction in Central Bank assistance to the Treasury. While in 2021 it was 3.7% of GDP; in 2022 it is expected to be 1%, in 2023 0.6% and in 2024 it will be close to zero, said Guzmán.

– Exchange policy: The Government denied that the program agreed with the IMF includes any type of devaluation jump.

– Inflation: According to the Economy Minister, the IMF conceded that inflation is a “multi-causal” phenomenon, and that it should be combated with a fiscal-monetary scheme and “strengthen public finances with a gradual reduction of the fiscal deficit.” In this sense, it foresees that “the State will fulfill a role of anchoring expectations, for that the role of price and income agreements in the anti-inflation scheme.”

– Accumulation of reserves: In 2022 it will have a goal of adding international reserves of about USD 5,000 million. Part of that would be achieved with the IMF’s own disbursements throughout the year.

– Structural reforms: The program will not include such policies, Guzmán said. “It aims to solve the problems that our productive structure has been suffering. It points to measures that favor the sectors that can generate foreign currency and to strengthen the tax administration”, he said.

– Next steps: The board of the Monetary Fund discussed this morning the technical agreement and must approve it. For its part, the Government will send the understanding to Congress for debate.

– Political support: Guzmán assured that the political support will be evident during the parliamentary treatment.

– Market reaction: Stocks and bonds were up more than 10 percent at the market open.

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