The IMF approved the plan and sends $ 24,000 million to face the recession – 26/10/2018

The Board of the International Monetary Fund (IMF) approved yesterday in Washington the renewed agreement support which will provide a total of $ 56,300 million for Argentina and that accelerates the disbursement of about 24,000 million dollars that the government will have in the next 6 months, when a hard recession.

On the third floor of the IMF building on 19th Avenue, the directors of the member countries met at 10:30 am (Argentinian time) to discuss the agreement, whose thick line was presented a month ago to New York by Minister Nicolas Dujovne and the head of the Fund, Christine Lagarde. What was approved yesterday is an assessment of the commitment made in June, that did not stop the financial turmoil.

Although the new program has already received the public assent of Lagarde and several governments from the main powers, formal approval by the board of directors was required to come into force. As reported yesterday, in total, the IMF to lend $ 53,600 million to Argentina (equivalent to 10,710 SDR, the currency of the Fund). That's a bit less than the $ 57,000 million announced last month because they are calculated at the current price.

According to the new schedule, in a few days some $ 5,700 million (or SDR 4,100 million, the IMF currency) will enter the Consolidated Revenue Fund; 7,700 million (SDR 5,500) in December and 11,000 million (SDR 7,800 million) in March. That's why there will be about $ 24,000 million that will reach Argentina during the worst recession.. In the IMF, they calculate that GDP is expected to contract by 2.6% this year and by 1.6% in 2019, although they expect the economy to be afloat at middle of next year.

An IMF official pointed out that they were paying attention to the times that came in a time of macroeconomic adjustment. "It's not just December." The economy is in recession and will continue for months. The impact of the recession worries the authorities"Therefore, they stressed that the program included" fiscal space "to mitigate the shock among the most vulnerable, or 0.2% of GDP.

After chairing the meeting, the executive director praised the government's commitment and the steps it is taking to adjust to the agreement with the IMF and said that the implementation policies that support the program, as well as support from the international community, "Will enable the country to regain macroeconomic stability". He also stressed that the final approval of the finance law – which yesterday had a half-sanction of the deputies and was passed in the Senate – will be "The key to restoring confidence".

Although, in general, the Fund was complementary to the measures taken by Macri, the report prepared by the technical staff led by Roberto Cardarelli presented some criticism of the failure of the first agreement. "Markets have doubted the government's commitment to the program", wrote. They also highlighted "the initially shy communication strategy around the stabilization plan, as well as an unclear and sometimes inconsistent foreign currency intervention strategy".

The Executive Board is made up of 24 representatives from all member countries (some directors represent a group of nations), but the voices of the most powerful economies, who provide the body with the most money, including the United States, weigh heavier. Japan, China, Germany, Canada, France, Great Britain, Italy. It was ruled out that the agreement was approved because these central countries have already provided political support for the agreement, through statements and communiqués. In fact, President Donald Trump personally endorsed the negotiations between Argentina and the IMF and the reforms undertaken by President Mauricio Macri.

In general, the administration of Mauricio Macri Engage with zero deficit next year, a 1% surplus in 2020 and definitely abandon the inflation targeting system, who had defended the Federico Sturzenegger central bank and had disabled, although without admitting, the resignation Luis Caputo. Guido Sandleris being the head of the BCRA, they will now use the method of "monetary aggregates", with a flotation band for the dollar between 34 and 44 pesos.

The money will not come directly to our country, but through a system that is usual in these cases and that includes the bank movements in the Swiss city of Basel. To mobilize the loan, the agency usually uses the Bank for International Settlements (BIS), which is an international institution that functions as a bank of central banks of all IMF member countries. From there, he goes to Argentina. The process usually takes only a few business days. It is estimated that the remaining 5,700 billion will be available on Tuesday.

IMF disbursements will come in for "budget support" and will no longer be "precautionary" as in the original June agreement, which means that they will enter the country as long as they respect the objectives stated in the letter of intent.

The IMF will closely follow the progress made and will monitor the situation more closely, appointing Trevor Alleyne to represent it in Buenos Aires. The Jamaican economist will take office in November and the Fund will then open an office in the Argentine capital. Until now, the agency has an office at the Central Bank, which was inaugurated at the signing of the first Stand by credit agreement with the agency, under the chairmanship of Arturo Frondizi in 1958.