The IMF has indicated that it will analyze Argentina’s request to lower the cost of its credits, but with caution given its global financial role.

The International Monetary Fund (IMF) has indicated that Argentina’s request to reduce the cost of the agency’s loans will be analyzed, but without failing to take into account the prudential mechanisms of a global financial entity.

This was stated today by the general manager of the organization, Kristalina Georgieva, during a virtual press conference he gave from Washington for the start of the spring meeting of the IMF and the World Bank, in which he reiterated that the dialogue with the government is very constructive but has not indicated if there will be an agreement before the October Elections.

“We have a very constructive relationship with Argentina. Both teams, ours and Argentina, are working. Thus, during Minister Guzmán’s visit, we held a constructive meeting. The two teams have agreed on some general principles for the program and work continues. We will move forward on this. And then, when the deal is underway, we will present it to our board of directors, ”he said, without answering on the dates, which depend more on the government than on the agency.

Regarding Argentina’s request to reduce the cost of interest rates and surcharges on Fund lending, he said: “This issue is being raised as the Fund is going to undergo its periodic review of our charges. And this is the time when these types of questions can be discussed ”.

However, he clarified that “There is a reason the Fund has introduced exceptional access surcharges in the past, and that is to encourage countries to enter and exit programs as efficiently and quickly as possible.”

Georgieva clarified that Argentina’s request to reduce the cost of loans granted by the IMF should be carefully analyzed, as it is a global financial entity that must be cautious.

“Since the Fund is an institution that lends to countries most of the time when they are faced with difficulties, this poses a high risk and therefore forces the Fund to build also for the members, not for the management or for the members. members, get stronger through precautionary fees. In this sense, a prudent financial management of resources is taken, the charges are decided. And like I said, there will be a review. And as always, we listen to the members, then we seek a path towards what makes the most sense and where there is consensus among the members, ”he concluded. Since Argentina is a partner of the organization, it will also have to give its opinion if it wants the costs of the credits to be lowered, which could lead to a greater risk in the finances of the organization and to over-encourage (moral hazard) that countries turn to the Fund to ask for money instead of applying measures that allow it to do so on the private market, when the conditions to do so are met; In addition, this could block the possibility for poor countries to request resources from the IMF, since they have no market access.

Last month, the agency’s spokesperson, Gerry Rice, had specified that “the surcharges allow the IMF to continue to play a role of world lender of last resort in times of crisis. Something we have seen in all its glory during the COVID-19 pandemic ”.

“Therefore, they help strengthen the financial capacity of the IMF. In particular, they allow us to provide resources to members at affordable interest rates, often when they are stranded in private debt markets or faced with unsustainable interest rates. They allow us to help our low-income members in particular by strengthening our financial capacity. Surcharges are only paid when the outstanding credit of a member country is high and prolonged, ”he said during one of his regular conferences.

“Surcharges are important to strengthen the financial capacity of the IMF, in particular to enable us to help our lowest income and most vulnerable member countries. And in this regard, it is important to note that the bulk of IMF loans to low-income countries are made under our Growth and Poverty Reduction Trust Facility, which is granted on very low terms. concessional, often at a zero interest rate, and without surcharge, ”he added.

On the other hand, Georgieva also mentioned today the proposal of Argentina and Mexico to redirect the additional resources issued by the IMF towards middle-income countries and recalled that this injection of resources will be discussed in the coming months. come and at least not happen. earlier: August or September.

“Now that we know we have strong support like DTS relocation, we’ve had some ideas on what these options might be. We will carefully assess this proposal. We will be in contact with our members to ensure that the options we present have broad membership support and are defined on the basis of the most effective contribution to the needs of vulnerable countries. “

“So how to define these options is a work that will be done in the next step intensively in the coming months,” he said.

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