The Government and the International Monetary Fund (IMF) announced that they reached an agreement to recalibrate the goal of accumulation of reserves in the Central Bank, as a consequence of the impact of the drought, and will thus carry out the most substantial change since it came into force the new extended facility agreement a little less than a year ago.
This afternoon the IMF released a statement in which it supported the request made by the Ministry of Economy to review the conditional goals for the collection of foreign currency in the BCRA, the most sensitive objective within the three that make up the backbone of the agreement, together with the deficit tax and monetary issue.
“In a more challenging economic context, particularly the increasingly severe drought, stronger policy actions are needed to safeguard stability, address rising inflation and policy setbacks, as well as maintain the program’s anchor. In this context, revisions of the reserve objectives for 2023 are requested,” the multilateral organization reported in a statement this afternoon.
From the Ministry of Economy it was revealed that the quarterly goal would be readjusted by USD 3,000 million and the annual one, by some USD 2,000 million.
“This will partially accommodate the increasingly severe impact of the drought, while taking into account the offsetting effects of lower energy import prices and agreed policy measures. Most of this accommodation is requested to be done by early 2023, consistent with the anticipated impact of the drought,” the staff said.
In turn, regarding subsidies, the agency requested the full application of the tariff segmentation scheme, in order to meet the goal of reducing the fiscal deficit to 1.9% of GDP. From the ministry they assured that the conversations with the organism on tariffs were maintained around “accelerating the segmentation to end the regressiveness in the subsidies”.
“To meet the deficit reduction goals and strengthen the progressivity of energy subsidies, the authorities plan to continue implementing the agreed segmentation scheme, eliminating subsidies for higher-income residential users starting in May and for commercial users starting in May. end of 2023,” the Fund said.
As for inflation, the agency noted: “A stronger policy package is needed to safeguard macroeconomic stability, address rising inflation and recent policy setbacks, as well as ensure achievement of the program’s underlying objectives.” .
In any case, the Fund referred to a “rationalization of the exchange policy” and that Argentine officials “undertake not to use international reserves or issue short-term external debt instruments to intervene in parallel exchange markets.”
There is still a key step left for the agreement to materialize: the report prepared by the agency’s staff must be turned over to the IMF board of directors, so that it approves the changes made to the agreement. Only when the board of directors has enabled this step, the disbursement of USD 5,300 million could be transferred to the Central Bank.
It is not yet clear when the agency’s board of directors could meet, but the next maturity of USD 2.7 billion is next Wednesday the 22nd.
