The International Monetary Fund said on Monday it was evaluating measures implemented by Prime Minister Sergio Massa to try to curb the soaring price index and added that they were continuing to negotiate ways to "strengthen the program" to reduce inflation, which includes fiscal adjustment and strengthening reserves.
In response to a query from Clarín, an IMF spokesman said that they are "evaluating the measures" that Massa took this weekend, after the April price index was announced on Friday, which climbed to 8.4%.
The spokesman added: "As we have said before,we are continuing to discuss ways to strengthen the programme and safeguard stability in light of the severe drought."
"This includes policies to improve fiscal sustainability and strengthen reserves, both of which are essential to reduce inflation while protecting the most vulnerable."
The Government formalized on Monday a package of measures seeking to alleviate the unbridled escalation of prices that includes a new rate hike, greater intervention in the exchange market and the possibility of opening imports in some areas, such as food, to discourage remarks.
The Fund is in the midst of a strong negotiation – now in virtual form --- with Economy Ministry officials to try to approve the fifth review of the program because the fourth could barely pass it with a relaxation of the reserve target and the next one was heading for non-compliance.
Any new measure means that variables are disrupted and numbers change, so technicians must analyze the impact on what they are negotiating.
A month ago, after the IMF's Spring Assembly, Massa agreed in Washington with the Fund's deputy, Gita Gopinath, that they would renegotiate the program because the drought had strongly impacted the level of reserves and it was estimated that the government could not comply with the agreement.
"Everything is on the table," saidthe Economy Ministry and the Fund was receptive to analyzing all possible options to be able to navigate this complicated period, which includes the uncertainty of the PASO in August and the presidential elections in October.
Massa, who dreams of being a candidate of the Front of All, wants fresh money to strengthen the reserves in the red and also his aspirations. That is why it seeks that the Fund advance the disbursements planned in the second semester now. That's about $10 billion that would undoubtedly ease reserves, but the IMF is wary of granting because it fears they will fizzle out in efforts to curb the dollar.
If the BCRA's intervention in the foreign exchange market is now reinforced, the fear increases. "To intervene in only one direction, in this case selling, is to encourage speculators to bet on a new default. We are already without reserves, deeply indebted to the Fund, without access to markets. Selling what we owe the IMF to prop up an unsustainable exchange rate is unwise," Hector Torres, Argentina's former executive director to the Fund, told theFinancial Times.
The Fund is ready to help, but it is not yet known how. More goals could be eased, deadlines deferred and other maneuvers. If it agreed to advance disbursements, the agency would tighten with certain reforms aimed at curbing inflation, such as a faster reduction of the fiscal deficit and the strengthening of reserves. Monday's statement highlights precisely these two measures.
The Fund, it is worth clarifying, has not said anything about what is being negotiated. He does not want the Argentine economy to explode, but he doubts to grant such a large sum of money at a time when there is a high possibility that it will quickly vanish in the heat of the elections. In addition, while the United States has given the green light for a modification of the program, other board members view Argentina's constant requests with suspicion.
Massa had planned to resolve the issue in two weeks, but time is stretching and there is no news. Among the measures announced over the weekend are the acceleration of the agreement with the Fund and it is possible that the technicians will come to Washington by the end of the month. But for now, beyond the minister's hopes, there is no news of a possible closure and negotiations continue.
