Uncertain optimism: no end date for government-IMF negotiations

The parties are working on the fifth review of the country’s economic program

Negotiations with the International Monetary Fund (IMF) over the fifth review of Argentina’s economic program are “pretty close” to finishing, according to Economy Minister and presidential candidate Sergio Massa.

“Be calm, Argentina will agree with the IMF, but it will reach an agreement while defending the country’s idea of development with inclusion,” Massa said today during an inauguration of public works in the Buenos Aires district of San Martín. “We will not give up our sovereign power and we will not sacrifice ourselves at the altar of fiscal adjustment.”

Presidential Spokeswoman Gabriela Cerruti also spoke about the negotiations today at a press conference, saying they “will take as long as they have to take so that Argentina’s interests are preserved”.

IMF spokesperson Julie Kozack refused to answer whether the lender and Argentina will reach a deal before the end of July when the board is expected to go into recess.

“I will just repeat that the teams are working intensively with a view to making progress and completing the fifth review,” she said at a briefing in Washington DC when a journalist asked her about the negotiation time frame.

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

The IMF staff’s upcoming fifth review of the program will evaluate Argentina’s performance until March. If favorable, the review would lead to a US$4 billion disbursement.

The lender and the Economy Ministry are still renegotiating changes in the program. The main issues on the table are the possibility of the Fund making part of this year’s disbursements earlier than scheduled, and allowing the government to use those funds to intervene in the secondary bond market to stop runs on the Argentine peso — which become increasingly likely as the elections come closer.

Argentina is currently living through a reserve scarcity crisis — net international reserves are calculated to be negative US$6.5 billion — and the parallel exchange rates are experiencing a surge this week.

Washington, Beijing, and San Martín

In the last month, sources in the government have told the Herald and other media that an economic team would go to Washington to close the negotiations on three different dates, neither of which came to fruition. Today, Cerruti refused to answer whether a new date has been decided. 

Argentina has postponed all payments to the IMF due this month to July 31, and made part of the June payments using yuan it has free access to after a currency swap with China. Today, Kozack said that the yuan “is one of the five freely usable currencies that members can and have used to settle their obligations with the IMF” and that Argentina “remains current on their financial obligations to the IMF.”

Kozack denied allegations that the executive director for China at the IMF, Zhengxim Zhang, had sent a letter offering Argentina to keep using money from the currency swap to pay off the IMF in the coming months.

“Our understanding is that there is no such letter,” she said. “Our team has been working intensively with the Argentine authorities to make progress toward the completion of the fifth review and to help the authorities address a very complex and challenging situation.” 

Kozack listed stability, reserve accumulation, and fiscal sustainability as priorities in the negotiations.

Back in San Martín, Massa heavily criticized former President Mauricio Macri, saying that current the administration is trying to organize the debt he “took and used for capital flight.”

During the event, Massa also accused “economists from opposition parties” of communicating with the IMF to demand the lender not agree with Argentina. 

“An IMF official told me in a morning Zoom meeting that there were economists from the opposition who in the last few days got in touch and told them ‘don’t give them anything’, ‘ask for everything’, ‘this has to explode'”.

This is not the first time an accusation of this kind has been made by the government. In April, Sergio Chodos, the IMF Director for Argentina, contended that “three economists associated with the previous administration’s economy ministry tried to get the IMF to cancel all money disbursements to Argentina.” The economists rejected the accusations, which have yet to be proven.


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