The B-side of the $ 4.4 billion from the IMF: obligations, spending and the exchange differential

The International Monetary Fund (IMF) is advancing in issuance of new special drawing rights (SDRs), which function as the currency of the organization and are distributed among its members. The Ministry of Economy itself has confirmed that Argentina will receive $ 4,354 million are equal to maturities interests facing the country in the remainder of 2021. Thus, it will be able to continue to postpone the closure of the new program with the body, at least, until after the elections.

Although the news was celebrated by the minister Martin guzman and help clarify the financial situation, economists warn to continue to postpone the deal with the IMF increases uncertainty on local assets, while deferring the necessary measures to reduce the exchange rate gap and normalize the economy.

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Since LCG recalled that the SDRs are added to the reserves of the Central Bank but are recorded as a debt most of the country. In this sense, they indicated that the market does not celebrate expansion of this question and explained that it is because the outlook for more than a year is not good. “Even the most optimistic cannot think that the securities issued just a few months ago are payable,” they said in reference to the obligations resulting from the latest debt swap.

For its part, a report of GMA Capital he also warned of the negative effect on bonds, after last week’s falls that triggered country risk above 1,600 points. “The possibility of an agreement with the IMF before the end of 2021, the main driver expected for the first semester, he got even leaner. The $ 4,300 million that the SDRs will receive would allow our country to almost entirely pay the capital and interest bill with the Fund and, in this way, ‘take off the backpack’ the obligation to sit at the negotiating table before the elections», He indicated.

This is because the market understands that an agreement with the IMF means a adjustment in the public accounts. Its delay, on the other hand, prolongs uncertainty and generates volatility. “Paradoxically, the Fund’s dollars would allow Argentina to delay cases of discomfort relations with pay the bills with the inexorable Budget constraint. In this sense, the procrastination of economic policy would turn a deaf ear to the macroeconomic (budgetary and monetary imbalance, growth) and microeconomic (price and income policy) problems which accumulate under the carpet, but which leave their wake on various market variables, in particular country risk (including he is close). at 1600 points) and bonds, ”GMA said.

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For its part, Lorena Giorgio, economist of Econviews, manifested in the same tone. “A new program with the IMF expected that it will require Budget discipline and converge on the consolidation process that took place before the pandemic, with the government of Mauricio Macri. In this sense, the delay implies that this year, which is only electoral, the Government will have greater leeway to direct spending and spend something more, ”he said in dialogue with TN.com.ar.

Regarding exchange rate policy, the economist estimated that the IMF will surely ask close the gap between him dollar official and the parallels – which today are around 60% -. Instead, its deferral will allow the Central Bank to continue to slow the devaluation of the official to use the exchange anchor in their fight against inflation. “DEG’s revenues allow us to continue manage the gap through the operation that we see from buying and selling bonds. At the same time, it gives space for appreciate the exchange rate official in real terms, ”said Giorgio.

// The daily price of the dollar in Argentina

On the other hand, the economist said continuing to extend the deal with the IMF will complicate negotiations with other creditors. “It is very likely that negotiations with the IMF will extend beyond 2021. In return, the most possible scenario is that the for $ 2.4 billion with the Paris Club, in May, not paying if it did not close with the IMF. And it is practically impossible to think of a friendly postponement, since it is a maturity that has been postponed since last year, ”he warned.