The Vice Minister of Economy, Gabriel Rubinstein will lead the meetings that the national government will hold in Washington this week with representatives of the International Monetary Fund. The Ministry of Economy will seek to close the fourth quarterly review of the Extended Facilities Agreement, in order to achieve a new disbursement of US$5.4 billion.
Rubinstein and the head of advisers to the Ministry of Economy, Leonardo Madcur traveled to the United States last night, official sources reported.
The period analyzed is the fourth quarter of 2022, the year that Argentina closed with a primary deficit (not including debt services) equivalent to 2.4% of the Gross Domestic Product (GDP), with an overcompliance of one tenth, since the agreed target had been 2.5%.
For 2023, the primary deficit goal will imply a greater effort for the Argentine government in ordering public accounts: a ceiling of 1.9% was set. According to reports, in the discussion of the revision of the goals, Argentine officials will put on the table “the conditions” experienced in 2022, such as the impact of the drought on the future income of foreign currency from agriculture, and the continuity of the conflict between Russia and Ukraine, with derivations in energy prices and transport and logistics costs.
Last Saturday Sergio Massa met his economic team, including Rubinstein and Madcur, to outline four axes that are considered key in the super-ministry of Economy: inflation, financial stabilization, public spending and the growth of productive investment. The 6% that showed inflation in January triggered alerts, although Massa stated that the goal for the CPI for April to be below 4% still stands. The Economy Minister told CNN this weekend that the agreement with the IMF, which contemplates inflation of 60 percent for this year, “is achievable.”
Last January, Massa had critical words towards the IMF, considering that the commitment to review the costs of the war in Ukraine was being breached. “Argentina complied with its program, but the Monetary Fund is not complying with Argentina in reviewing how they are going to compensate the countries that paid the cost of the war with their economy. It is a problem to be solved”, said Massa, who took office at the beginning of August as the third Minister of Economy of the presidency of Alberto Fernández.
The minister had already warned in November, when participating in the G20 Summit in Indonesia, that “the war has been having a very high cost for the countries of the southern hemisphere” and that “it cost Argentina US$ 5,000 million and there is no global environment where this topic is being discussed”.
According to official information, fuel imports totaled US$5.8 billion in 2022, once morest the US$2 billion projected before the start of the war, which resulted in a net increase of US$3.8 billion.
In addition to the cost, the increase in the price of the main basic products required more foreign currency to import fuels, including those used for the supply of energy during 2022. The Ministry of Economy stresses that, following the outbreak of the conflict on February 24 of last year, when Russia began the invasion of Ukraine, it was necessary, among other things, to renegotiate the natural gas import contract with Bolivia, which had an increase of 114%, and the increase in purchases of Brazil electricity.
Another factor that had a negative impact was the increase, on average of 93%, in the prices of fertilizers. Argentina imports regarding 70% of the products that the countryside needs.
As a mitigation to this situation, the government highlights the advancement of the acquisition of LNG for US$ 262 million, which will allow foreign currency savings that are estimated to amount to US$ 2,100 million in all of 2023, and mainly the construction works of the Presidente gas pipeline Néstor Kirchner, who will reduce both imports and gas subsidies.
In the last review of September 2022, the deputy managing director of the Fund, Gita Gopinath, maintained that in the Argentine case “continued decisive political actions are beginning to bear fruit.” “In a more challenging external and internal context, the determined implementation of policies, including the tightening of fiscal and monetary policies, is leading to a reduction in inflation, as well as improvements in the trade balance and reserve coverage,” Gopinath stated.
Rubinstein and Madcur participated in the deliberations in early February with the IMF technical teams. The head of the delegation of the multilateral credit organization, Luis Cubeddu, participated by video call.
