Twelve installments to be paid between 4 and 10 years, the only plan that the IMF accepts

Argentina to pay IMF US $ 5.19 billion this year and US $ 19 billion next in principal and interest. Today he doesn’t have that money. And neither. To be able to do this, agricultural prices or local harvests would have to generate an additional increase in agro-currencies and the government would have to obtain alternative sources of finance like China, Russia or the reallocation of SDRs as requested by Martín Guzmán.

The choice number one The government will therefore sign an extended facilities agreement with the IMF. What would this plan allow? That the agency return the money to the country to meet the deadlines. The option number two does not pay and is in arrears (arrears). Sudan was the last country to find itself in such a situation. A few months ago, he regularized his situation.

If the IMF loaned Argentina the money to meet the payments of the debt that Mauricio Macri contracted in 2018 (about $ 47,000 million), the regulations of this line of credit establish that the country should return the debt. silver between 4.5 and 10 years. Payments are made in 12 equal semi-annual installments. And the first four years are of grace. With what, if the government signs a plan with the agency after the elections, assuming that it starts to be realized from 2022, it will mean that Alberto Fernández will receive the dollars to pay the deadlines next year and these currencies will have to start being repaid between 2026 and 2032 (2022-2026 is the grace period). In other words, the next president will have to pay – in installments – what Fernández signs. The president said something yesterday when he said: “I could sign an agreement today and my government would not have to pay anything, because in any case I have a waiting period that would free me, but I don’t want to solve Alberto Fernández’s problem; I want to solve the Argentina problem ”.

Kristalina Georgieva is also interested in the same because she wants to make sure that if she is going to lend her money so that they pay the IMF, We must ensure that the country will be able to reimburse it between 2026 and 2032. How to do it? This is where a myriad of measures and reforms come in to help the country improve its repayment capacity.

The footprint of these loan repayment programs between 4.5 years and 10 years is not subject to change. IMF spokesman Gerry Rice has said it before. And Martín Guzmán himself explained it in public to his troops at the beginning of the year. It’s not part of your work schedule no matter how much Vice President Cristina Kirchner, and now President, shout it in front of their podium. The IMF will not be able to modify these statutes only for Argentina. Yes, on the other hand, many believe that the agency has an opportunity to reduce the surcharges it charges on disbursed loans.

In 2018, the Macri administration signed a stand-by agreement which resulted in a loan of 44,000 million US dollars. For levying more than 187.5% of its quota (in fact more than 1000%), Argentina paid a surcharge of 200 basis points compared to the minimum rate of 1.05% . In addition, after three years with an outstanding loan that remains above 187.5% of maturity, an additional 100 basis points are added to the surcharge, reaching 300 basis points. So far in 2021, 670 million SDR has been paid in interest (approximately US $ 952 million) and there is still 275 million SDR (US $ 390 million) to be paid in November. At the same time, the first two principal repayments will take place in September and December, both for an amount of SDR 1,327 million (approximately US $ 1,880 million each).

Can Argentina contract arrears with the IMF and ultimately there is no agreement? Government economists say no. Even Augusto Costa, production minister for the province of Buenos Aires, Axel Kicillof’s number two, is in favor of an agreement.

When a country defaults with the IMF, the agency’s first action is to cut aid and demand immediate payment. A bureaucratic process begins which could lead the board of directors to request the expulsion of this country from the body in two years. Over the past 40 years, the IMF has faced some 30 cases of long arrears.

The market takes it for granted that the government will finally come to an agreement. But it is also true that at present there is no well advanced line of work in this regard. “There are talks, not negotiations”They say in IMF staff about the Argentine case.