Buenos Aires — President Alberto Fernández announced this morning an agreement in principle with the IMF to restructure more than $40 billion that Argentina owes to the organization for Stand By, the unfinished program reached in 2018.
After the announcement, Martin Guzmán, the minister of Economy, offered several details of the extended terms of the agreement negotiated with the Fund, specifying some goals for the next three years: primary fiscal deficit of 2.5% of the GDP for 2022; 1.9% for 2023 and 0.9% for 2024. Furthermore, he said that monetary emissions to cover this deficit will be equivalent to 1% of GDP this year.
He also stated that the IMF will review the compliance with these guidelines every three months.
The IMF then issued a statement in which it confirms that “they have reached an understanding on key policies”, but notes that “discussions on an IMF-supported program” are still underway.
Here are the three steps that the government and the IMF still need to take to transform this first understanding into a formal agreement.
#1 Agreement with the technical staff
In the coming weeks, the Argentine government will have to resolve several details of the negotiation to reach a general agreement with the IMF’s technical staff. The two main officials of the Fund conducting this negotiation are Julie Kozack, Deputy Director of the Western Hemisphere Department, and Luis Cubeddu, Mission Chief for Argentina. On the Argentine side is Sergio Chodos, Argentina’s representative to the IMF.
Anything settled between the two parties at this level of the negotiation will determine the fine print of the agreement, which will then have to go through two other key steps. Bloomberg Línea asked the government and the IMF for more details on what still needs to be discussed, but they declined to comment on the matter.
#2 Congress Approval
In February 2021, the Chamber of Deputies enacted the bill for the Strengthening of the Sustainability of the Public Debt, sent by Guzmán in November 2020. The bill establishes that “the borrowing in foreign currency under foreign legislation, and with extension of jurisdiction, will require the authorization of the National Congress.”
Thus, once the agreement with the IMF staff has been reached, the government will have to submit this program to Congress for its approval. The first reactions after today’s announcement indicate a favorable outlook for the ruling party in both chambers of the Legislative Branch.
#3 IMF Board Approval
Once approved by the Congress, the agreement reached between Argentina and the IMF staff will have to be discussed by the IMF board, which is made up of 24 directors.
A key factor in this instance will be the support that the government can receive from the United States, the most powerful member of the organization with veto power, and also a strong member of the international community.