What are the four challenges the government must face before agreeing with the IMF

With the resumption of ongoing talks, the Government is already adjusting the technical details that it will present to the International Monetary Fund (IMF) in the next discussions, with the idea of ​​being able to close the agreement between March and April and thus renegotiate the debt with the Paris Club ahead of the 2.4 billion US dollar deadline that will run in May.

But if this is one of the dominant issues of the first half for the economic team, it is not the only one, given the huge budgetary and monetary imbalances and the possible exchange rate tensions that may arise during the year. summer, in addition to the effect of the recession on employment. and wages.

Economic plan

The most important shortcoming that analysts point out to the government is that of an economic plan that is consistent with the budget plan and explains the path to primary equilibrium, knowing that this year it will close with another very high deficit, between 3.5% and 4.5% of GDP after a 2020 which closed at around 6.5% and the way in which it will fall and its financing generates a significant uncertainty in the market.

Experts stress that this roadmap should be accompanied by policy signals that appease financial variables such as country risk and the currency differential, which stimulate dollar entry and ease exchange rate tensions

But these maneuvers must be carried out before reaching an agreement with the IMF and not after the agreement, said the economist Martín Vauthier, Eco Go, so that later they crystallize with the new funding program and then helped to regain confidence and stability.

“These signals must appear as soon as possible, it is very important that the gap is compressed before the harvest is liquidated., it is very difficult if there is not a large supply of dollars from the month of April because the incentive with gap to settle the dollars is very limited ”, he explained to The chronicler.

Esteban Domecq, from Invecq, endorsed this vision and stressed that stabilizing financial variables would allow greater funding of this year’s fiscal red via the domestic market, with less reliance on monetary aid.

And he added: “It is very important that the favorable international context is maintained in the first quarter of the year while the bridge is underway: soybeans above 500 USD, rising stock markets, capital flows to emerging markets and stable currencies in the region. “

Inflation

The inflation figure for December will be around 4% and it is not expected to decrease in the first few months of the year despite the fact that a good part of the index is anesthetized by price programs, frozen tariffs and other regulated amounts.

Analysts believe the rate will hold steady at this pace due to the impact of last year’s mega-issue and the increasing shift from tradable goods to parallel prices, given greater import restrictions in the official dollar.

“The government should try to anchor inflation expectations which have been on the rise throughout the second half of the year despite continuing to anchor inflation with the dollar and rates,” Domecq said .

Above all, analysts are worried about the rise in foodstuffs which, according to the survey LCG They increased by 1.2% in the first week of the month and are said to be around 4%, despite the fact that a good part of these products are anesthetized by price controls, such as maximum prices.

Reactivation

After a historic drop in the economy of around 11% in 2020, the statistical rebound will oscillate between 4% and 5%, which, given the magnitudes, will be very little noticeable: in the two-year period the economy will have fallen d ‘about 7%, with its consequences deterioration of wages and destruction of jobs.

Formal wages lost around 2% in real terms in 2020, the cabinet estimated Analytica, but since the beginning of the quarantine until November, the decrease is more than 5%. Unemployment was 11.7% in the third quarter, but with two million fewer jobs than in 2019.

In the election year, in the first months, the first movements to accentuate the rebound were already observed, with the postponement of the increase in gas and electricity tariffs expected at the start of the year, which will delay the reduction of the deficit. budget and will cloud the signals that can be given on this subject to the Fund and to the market.

Local debt

Although there are neither foreign debt payment obligations this year nor next, the voluminous local currency maturities persist. Between January and February, $ 320,000 million in bonds and bonds held by individuals mature which the government will seek to renew and also secure additional funding of 10%.

In January, $ 166,850 million will fall due, almost all concentrated at the end of the month between discount bills (Ledes) and variable rate bills (Lepase), for respectively $ 141,540 million and nearly 50,000. millions of dollars. In February, meanwhile, $ 153,136 million expires; but March is already much less difficult with bonds of $ 5.32 billion.

Any excess of more than 10% of the funding should be used to repay the central bank’s temporary advances in advance. While the stock is $ 1.45 trillion, in the first quarter of the year, less than a tenth is due, or about $ 135,000 million.

Meanwhile, US $ 2.121 billion of a non-transferable note held by the monetary authority will expire in March, but it will surely be renewed like US $ 7.5 billion in January.