Black Thursday for the Argentine economy – no deal with the IMF
Argentine President Alberto Fernández and Economy Minister Martín Guzmán have agreed not to give in to additional demands from the International Monetary Fund (IMF) for the $ 44 billion loan from the previous national administration.
Following Guzmán’s announcements, Argentine bonds fell 2% on average, leading traders to call it a “black Thursday”.
Misunderstanding with the IMF also pushed Argentina’s country risk to 1,828 points, once again approaching its recent peak of 1,900.
Statements by Guzmán, Fernández and presidential spokeswoman Gabriela Cerruti were not welcome among investors. The disagreements relate to tax adjustments that the multinational body would like to see enacted in Argentina.
With Thursday’s losses, bonds are racking up declines of up to 7.5% over the past five days.
Country risk has increased by over 4% and 69% since the September 2020 debt swap when US $ 65,000 million was restructured.
Regarding negotiations with the IMF, Guzmán stressed that disbursements to cover the current deadlines have been considered, which suggests that there will be no new financing. The minister also explained his main macroeconomic guidelines for the near future, which have been shared with IMF officials and are characterized by gradual fiscal consolidation, positive real interest rates, a gradual reduction in monetary financing, a rate of real exchange compatible with the trade surplus, the accumulation of reserves, the continuity of capital controls and price and income policies.
Guzmán also claimed that the IMF’s proposal would “stop the economic recovery”. He also explained that reserves are expected to drop from US $ 3 billion to US $ 4 billion per year, while monetary financing for 2022 has been capped at 2% of GDP and is expected to decline gradually over the following years.
President Fernández warned that “adjusting the economy is to stop growing”? and for this reason the word adjustment is banned from the discussion. He insisted that he was confident that Argentina will achieve a suitable restructuring ?? debt to the IMF and recalled that the repayment of the loan granted to the government of former President Mauricio Macri will go beyond his own mandate and that of the one who will be elected president in 2027, which will generate other problems in the years to come. ??
Cerruti, also underlined the low probability that the government will make the adjustment requested by the Fund. ?? Argentina knows it won’t make any kind of adjustment, because when Macri adjusted, it didn’t help the country grow or even pay the debt to the IMF. ??
With payments worth $ 2,879 million due in March and the level of reserves in critical condition. Guzmán doesn’t have much time to seek a more reasonable deal.