IMF risks losing legitimacy over Argentinian loan: minister

Published on:

Buenos Aires (AFP) – Argentina’s economy minister, renegotiating a massive loan with the International Monetary Fund, warned the lender risked losing credibility if it “pushed” the country “into a destabilizing situation”.

Argentina received $44 billion of a $57 billion loan which the lender itself said last month had fallen short of its goals of restoring confidence in the country’s fiscal sustainability and promoting economic growth.

Latin America’s third-largest economy has been in recession since 2018 and is seeking to renegotiate its installment plan, with $19 billion and $20 billion due in 2022 and 2023.

The country recorded GDP growth of 10% in 2021 after a 9.9% drop the previous year, largely due to the coronavirus pandemic.

Guzman, in an interview with AFP, said the repayment schedule was “unsustainable” for a country struggling with a poverty rate of around 40% and one of the highest inflation rates in the world. at 50%.

The government of center-left President Alberto Fernandez, which refused to accept the last $13 billion of the IMF’s biggest-ever loan in 2018 under his conservative predecessor Mauricio Macri, is seeking a deal that will reduce the budget deficit by Argentina through economic growth, not cuts in public spending.

Here is what the Minister said:

Q: How do you see 2022 going? Is there a default risk?

A: Argentina has a very high trade surplus, which is the highest level we have reached. It exceeded $15 billion in 2021. What balance of payments problem will Argentina face in 2022? It is precisely the debt to the IMF. And that is why it is important to refinance it.

This is important for the country and also for the IMF.

If the IMF pushes Argentina into a destabilizing situation, it will also have less legitimacy in the future when other countries need multilateralism to solve their problems with the international community.

IMF chief Kristalina Georgieva with Guzman during a meeting in 2021 – Ministerio de Economía de Argentina/AFP/File

If we’re going to protect each other and the machinery of multilateralism, it’s important to agree on something credible. And believable means achievable.

We have a set of economic and social objectives, and of course we want to keep our commitments, but we need time. We must be able to refinance these debts.

We do not need, for now, to be burdened with conditionality that halts recovery and inhibits Argentina’s capacity for medium- and long-term development.

Q: Do you expect the support of the United States as the largest shareholder of the IMF? What do you think of Democratic lawmakers’ call for US Treasury Secretary Janet Yellen to support a review of IMF surcharges on larger, ongoing loans, especially at a time when countries need additional resources to fight the pandemic?

A: It was an important request addressed to the Secretary of the Treasury of the United States to support in the board of directors of the IMF a revision of this policy, which harms the countries in crisis which have what is called “exceptional access to the International Monetary Fund”.

They are charged more when the situation is worse. This…does not help fulfill the Fund’s mission of ensuring global financial stability. Countries that suffer these interest surcharges lose resources to make the investments needed to improve repayment capacity.

Q: Where is the disagreement?

A: There is almost agreement on where to converge; what is the main budget result (before interest payments).

The disagreement lies in the speed (of reimbursement) and this has to do with different objectives.

In 2021, with the economy growing by 10%, the primary budget deficit has decreased by 3.5% of GDP. The budget deficit in 2021 was between 2.9% and 3.0% of GDP – the figure will be known on January 20. That’s a big drop. Good fiscal consolidation is underway.

What the IMF has put forward is that there must be faster fiscal consolidation.

Centre-left President Alberto Fernandez (right) refused to accept the last $13 billion of the IMF's biggest ever loan in 2018 under his conservative predecessor Mauricio Macri
Centre-left President Alberto Fernandez (right) refused to accept the last $13 billion of the IMF’s biggest ever loan in 2018 under his conservative predecessor Mauricio Macri Juan MABROMATA AFP/File

But there are two problems: the first is that the way they propose this to be done would halt the economic recovery in the short term. The second is that…it would focus on a smaller expansion of public infrastructure investment. For us, this is essential, because this investment is what Argentina needs the most, from a productive point of view. This is where the tension lies.

Q: You referred to the difference between a perfect match and an acceptable match. Are you closer to an acceptable agreement?

A: There is no perfect match…

What we seek is to move forward rather than backward. I would say we are a little better than a week ago, but there is still a long way to go. The frequency (of contacts with the IMF) is not only daily, but several times a day.

Comments are closed.