Economy ministry representatives are in Washington DC for closing discussions with the International Monetary Fund (IMF) about the fund’s latest review of the country which, if approved, would lead to a US$5.4 billion payment.

The government and the IMF signed an Extended Fund Facility agreement in 2022 after renegotiating the US$44 billion debt former President Mauricio Macri acquired in 2018. The new deal includes an economic program that Argentina must comply with in order to receive disbursements or payments every three months, which are used to pay for the previous debt with the IMF.

This latest review, the fourth, will be negotiated by Economy vice-minister Gabriel Rubinstein and chief economic advisor Leonardo Madcur. It evaluates the country’s economic performance during the last quarter of 2022 and according to the IMF’s schedule, the corresponding funds would be available no sooner than March 10.

There are promising signs. In its third review of the program, the IMF reported that preliminary data suggested that all end-2022 quantitative targets were “well within reach.” Last year, Argentina had a 2.4% primary deficit, in line with the agreed goal of 2.5%. 

The lender has criticized Argentina’s use of “intense exchange restrictions” and “multiple currency practices” to achieve last year’s reserve accumulation — another structural goal set by the agreement. Although the IMF does not recommend multiple exchange rates, it did issue waivers of non-observance, or exceptions, regarding these policies.

Other targets for the end of December included conducting a study on the sustainability of the pension system as well as improving the targeting of social expenditure and energy subsidies.

Looking ahead

Although passing the fourth review seems like a sure thing for the government, 2023 is a different story for the reserve accumulation goal.

The primary deficit goal for 2023 remains unchanged at 1.9% and the net reserve goal for the first quarter is US$7.825 billion. But earlier this year, the Foundation for Agriculture Development (FADA) found that the agricultural industry will export US$13 billion less than in 2022, mainly due to the ongoing drought. Moreover, the Rosario Stock Exchange reported that corn crop projections fell by 15% while soybean harvests were down by 7%.

According to financial advisor Cohen Aliados Financieros, due to the decrease in agro exports, the increase of energy imports, the Central Bank’s intervention in the currency market, and the sovereign debt buyback, the country “sacrificed” international reserves. 

“Net international reserves are 50% lower than the target agreed with the IMF,” the report read.

Moreover, consulting firm Delphos Investment stated in its weekly report that if Argentina does not engage in “creative” measures, the country will have to ask for a new waiver from the IMF. 

“It would not be disruptive, but it would ratify that the net reserve goals are very demanding for the current situation.”

In January, Economy Minister Sergio Massa said that “Argentina complied with its program, but the IMF is not complying with Argentina by not reviewing how they are going to compensate the countries that paid the cost of the war [between Ukraine and Russia] with their economy.”