For its part, the Fund provided evidence of some of the conditions it is bringing to the negotiating table on the Extended Facility Program requested by the Executive Authority. It was in the assessment report that the organization published yesterday in the run-up to the G20 meeting and Georgieva herself cited in an article published the same day on the entity blog.
In the text, the IMF warns of the uncertainty caused by the development of the pandemic, the risks of accelerating inflation on a global scale and the disparity in the pace of economic recovery between different countries, although it makes some specific comments about Argentina.
In particular, he stated that the country needs more restrictive monetary and fiscal policies, which are two key axes for negotiation. On the first point, he stated that “monetary policy should remain accommodative in most economies,” while in developed countries where there is a recovery in inflation expectations (such as the United States and the United Kingdom), he said that it “would be key to avoiding an early rise in the policy interest rate.” “So as not to stop the economic recovery. “Where inflationary pressures are high, a tighter monetary policy stance (Turkey) will be required and, in some cases, a tougher overall stance (Argentina) will be needed to rebuild confidence,” he added.
In general, the requirement includes ending fiscal deficit financing with cash assistance from the BCRA and covering the transition to balancing public accounts with indebtedness. Something the government is trying to do gradually: in fact, in the first half of the year funding from the Treasury was practically half and half, while the central bank contracted the monetary base at 11.5% in the same period. The question about speed. It’s a classic box approach that has always led to negotiation, but the important thing happens the moment the letter is released, which doesn’t resonate well in formal letters.
On the fiscal front, the IMF report insisted on advocating spending on developed countries, but it made a difference in the case of Argentina, as it suggested the need for a faster cut. “In some economies facing fiscal constraints, short-term consolidation focusing on progressive taxation and low priority areas of spending (eg Argentina) may be necessary.
In this regard, establishing credible medium-term fiscal frameworks (such as revenue mobilization plans; commitments to address fiscal shortcomings) can help improve confidence and help establish a path to rebuilding buffers. Prosecutors at a rate dependent on the recovery stated in the document.
So far this year, the government has prioritized fiscal discipline and the primary deficit has fallen to just 0.1% of GDP between January and May. Although it has already been announced that there will be an increase in spending in the second semester, with the aim of supporting the income recovery in the previous legislative session. A few days ago, Vice President Cristina Fernandez de Kirchner herself referred to the negotiations during a ceremony in Lomas de Zamora, in which she stated that the IMF “when it makes agreements, it wants to condition the public policies of each country.” These points will be up for discussion.