Low income concern that complicates compliance with zero deficit

The report that will be presented by the owner of the organization Christine Lagarde The board will certainly take into account the trend towards higher inflation and possibly a reduction in estimated growth. The IMF estimated that GDP would fall this year by -1.7% and inflation by 30%.

Similarly and according to the transcended organization, the multilateral organization is worried about the decline in tax revenues due to the recession and, in this sense, is worried about the high level of rates.

It should be recalled that in mid-December, in the report on the second revision, the Fund believed that "the peso has stabilized and that, even if it remains high, Inflation has begun to decline, the effects of depreciation damping weight Overall, the Argentine economy continues to shrink and continues to be vulnerable to changes in market attitudes. economic activity should begin to recover in the second quarter of 2019. "

These forecasts, particularly those relating to inflation, are not being made and the report to the Council should make reference to this question. Today, most economic studies already forecast for this year inflation between 35% and 40%, far from the 23% estimated by the economic team under the direction of Nicolás Dujvone.

At the Treasury Palace, we are actively working on the preparation of the numbers necessary to provide essential information to the International Monetary Fund: closing the fiscal figures for the first quarter of the year. According to official sources reported at ámbito.com, although expenditure has been reduced, resources have also decreased, which has the effect, in principle, of the numbers are "very tight".

In this regard, it should be recalled that in March, the collection of taxes had increased by 37%, about 10 points less than the inflation estimated by private consultants for the last twelve months (53%).

Recession

The fiscal target is the one the IMF observes the most and the future disbursements that the multilateral agency plans for the middle of the year depend on its implementation. Recession complicates income growth. Moreover, it is said that Fund technicians are concerned about the high level of real interest rates and their impact on an activity that they understand can hardly be sustained for more than a year.

However, the official media are convinced that the extent of the adjustment made by the government and the political support it receives from abroad dispel the inconvenience of the forthcoming disbursements.

In this regard, news from Washington, where the multilateral organization has its headquarters, indicates that the Fund's technicians consider that the current account of the balance of payments and the refinancing of the short-term public debt have evolved better than expected, although they do not stop notice higher refinancing risks from the second half of the year, in the run up to presidential elections.

According to IMF badysts, countries like Ecuador, which have worse economic foundations than Argentina, show that the dollar sovereign debt curve is 200 basis points below the yields offered by Argentine bonds.

This gap reflects the "political risk" of the possible application of Cristina de Kirchner, according to the comments reserved technicians. Therefore, if Kirchner's widow did not show up, one could expect a decrease in the differential, although badysts at the agency do not believe that Argentina can achieve the 350 basis point surcharge that it had in 2017, until structural reforms are advanced.

In any case, the second half of the year would be a period of "crisis management", due to political uncertainty, and it would not be possible to start with the structural reforms expected by the IMF.

Exchange rate

It is also commented that the fund remains adamant about the exchange rate management policy. According to badysts of the agency, the political risk is not solved by intervening with the unused funds granted by the IMF for the reinforcement of the reserves. Hence the insistence on maintain the current pattern of trade bands and the refusal to grant more degrees of freedom to the Treasury to intervene in the foreign exchange market.

Given the concentration of the country's debt maturities with the Fund in the coming years, Washington sources recall that credits in reserve end up being transformed into long-term programs – Enlarged Fund (EFF) – as was the case recently with Jamaica and Ukraine.

Although the EFF generally does not involve a significant expansion of funding – the amount already granted to Argentina is record – Yes, they allow the restructuring of debt payments with the agency in extended time.

Of course, consideration is the realization of structural reforms. In this regard, it should be recalled that the agreement signed by Argentina with the IMF provides for changes to the pension and labor legislation.

Technical waiver

Argentina requested a waiver for the application because at the end of the last revision, some tax data were not available at the end of March. It's just the availability of some data, according to official sources. The Argentinian authorities have asked the IMF not to submit the March budget data for the Council's consideration. This information can not be released in time for the council meeting to be held on Friday, as the March financial results will be released in mid-April.

The IMF's review of Argentina was initially scheduled for late March, and only economic data would be taken into account until December. As the meeting has been postponed until April, the data will be included until March. However, official sources claimed that the requested exemption had nothing to do with a request to change the country's targets or timelines. Argentina had already benefited from a similar exemption during the first review of the Council.