Mary Church
08/26/2020 - 15:49
- Clarín.com
- Economy
Argentina formally started a request for a new loan with the International Monetary Fund . The official intention is to refinance the 49,000 million dollars that are owed to the agency (between capital and interest), according to the government.
That is why they invite the IMF staff to start a mission to start the talks. The first step was taken by President Alberto Fernández , who this morning maintained a telephone communication with the managing director of the organization, the Bulgarian Kristalina Georgieva , in which the Minister of Economy, Martín Guzmán , and the Argentine representative before the Monetary Fund also participated. International, Sergio Chodos .
During the conversation with Georgieva, Alberto Fernández stressed the need for the future program between Argentina and the IMF, "to respect the objectives of economic recovery and solve the most pressing social problems," was detailed from the Ministry of Economy .
After the meeting in Olivos, Guzmán and Chodos went to the Palacio de Hacienda to sign, together with the head of the Central Bank, Miguel Pesce, a letter addressed to the managing director of the IMF that formally begins the dialogue.
With the premise that "there is no possible stabilization without economic recovery," in a letter addressed to Georgieva, Argentine officials criticized the previous stand-by, signed under the government of Mauricio Macri, through which Argentina received US $ 44,000 million, which must be returned from September next year, to which interest is added.
In the letter, signed by Guzmán and Pesce, they make eight observations. Among the most significant is the one that alleges that the previous loan was unable to "restore both confidence and to generate robustness through an increase in the level of international reserves" , is that Argentina now faces "important balance of payments needs to the period 2021-2024, mostly associated with the previous acquisition of the IMF ” .
"In this context, we formally require financial assistance under a program with the International Monetary Fund, and we invite the staff on a mission to begin talks," they add.
Guzmán assured that no more resources will be requested from the IMF than those necessary to repay the previous loan, that is, about US $ 49,000 million. But several analysts believe that it would be convenient to request extra dollars to close the financial needs of the next year.
“We hope that the talks and the new program do not repeat what the current administration considers to be the flawed budgets of the 2018 program. To that end, it is essential that an accurate assessment of Argentina's challenges be made, and we look forward to exchanging views with your staff on these issues, "the officials say in the letter.
Among other points, add that despite the fact that Argentina complied with the reduction of the fiscal deficit between 2017 and 2019 , “the flight of assets denominated in pesos continued and the country was not able to obtain satisfactory refinancing rates, nor to ensure the sustainability of public debt ”.
Also that economic activity contracted by 2.6% and 2.1% during 2018 and 2019 respectively, and inflation was respectively 47.6% and 53.8% for 2018 and 2019; "This combined with an unprecedented monetary contraction," they argued.
Remember that you advance in the debt exchange with private creditors. "We hope to soon complete the debt restructuring process with bondholders, obtaining wide acceptance and consolidating an agreement consistent with the sustainability of public sector debt, as well as with the economic recovery," they said. This process culminates this Friday, August 28, to which is added the segment of the debt exchange under local legislation.
They also defend that since December 2019, they have implemented "a different set of policies designed to prevent a further drop in production and employment, reduce inflation, restore the sustainability of external and public debt, and create the conditions to facilitate the removal, in due time, of restrictions on access to the official exchange market ”.
Among the economic impacts of the coronavirus, in the letter they acknowledge that "production contracted approximately 20% in the second quarter of 2020", which is why "several measures were adopted to support workers and companies, such as such as the emergency family income (IFE) to assist families without registered income, and the "assistance to work and production" to pay up to 50% of wages, "they mention.
"The effort of these policies and the reduction in tax collection associated with the COVID-19 pandemic increased the primary fiscal deficit, which reached 3.3% of gross domestic product during the first half of 2020," they acknowledge.
And they assure: “We are determined to restart the process of implementing a consistent fiscal path once the effects of the pandemic disappear, reducing the primary fiscal deficit in a way that is compatible with both the sustainability of the public debt and the Economic recovery".
Guzmán, who made the letter public shortly after President Alberto Fernández said that he had an "extensive talk" with Georgieva, stressed that the crisis facing the country "was deepened by a quick agreement with the IMF in 2018, unsustainable , and made with his back to society ".
