While a mission of Monetary Fund specialists is heading to Argentina to begin a fifth revision of the Stand-By Agreement next week, there are doubts regarding the continuity of disbursements, due to the eventual future breach of the agreed terms. For now, sources from the IMF flatly ruled out to LPO that the Agreement has fallen through.
There's a clear division between President Macri's loyalists, which argues that the IMF will approve this fifth revision, and the government technocrats, who are more skeptical and say that "the coin is still in the air".
Among the first group, the argument is that the review refers exclusively to the quarter that ended last June when all intermediate goals were met. And while they acknowledge that it is true that the last package of measures will cost no less than $40,000 million Argentine Pesos, they also expect the new inflationary jump to drive nominal revenue by about $ 35,000 million, so that the unscheduled gap could turn out to be a derisory amount compared to the numbers the IMF handles.
The position of FernÃ¡ndez is that a deep renegotiation will have to take place with the agency to decompress the maturities of the next few years and give the economy enough room to grow again. In other words, Alberto will not adjust next year to achieve a 1% surplus as established in the Agreement.
It's precisely because that 1% that the repayment of the IMF loan in 2020 was to be covered, is dangerous and it is not even clear that Lacunza can "reach the point" up to 0.5% deficit this year, analysts do not believe that it is enough, having met the intermediate goals until June for the IMF Board to disburse $ 5.4 billion more come September.
As LPO has explained before, the dollar's jump caused the external debt to also jump to levels that would become, according to the methodology of the Fund, directly "unsustainable" - not even "sustainable but with little degree of probability", as it was noted in their previous report-, which would force Kristalina Georgieva to begin her term as head of the institution making a huge exception to IMF statutes.
The position of FernÃ¡ndez's Frente de Todos is that a deep renegotiation will have to be done with the agency to decompress the maturities of the next few years and give the economy room to grow again. In other words, Alberto will not adjust next year to achieve a 1% surplus as established in the Agreement.
An influential Wall Street analyst explained to LPO that "The Fund has another problem because its agreements involve access to voluntary debt markets, which is not the case with Argentina. That's a potential problem due to its usual way of operating."
The political side also has its edges to take into account. "Letting go of Macri's hand now would be for the Fund to add a new failure, to have generated another social crisis and damage to his image as [it happened before] with De la RÃºa."
The specialists from the IMF are arriving later than expected and it is known that they won't give the agency enough time to get to vote on the Board the fifth staff report before September 15 as it was stipulated. This may well be read as a sign of skepticism of the institution that also changed the zeal with which it previously expressed its support for the Executive's measures due to their being absent, as it was noted last week. Although the new Minister of Finance, HernÃ¡n Lacunza, said it was him who asked Cardarelli some time to settle in the Ministry before hosting the IMF delegation.
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