The IMF affirmed that the Government will eliminate the stocks this year and that it must avoid an exchange delay - Infobae
Source:
www.infobae.com
February 01, 2024
The Fund mentioned that the economic plan is exposed to risks due to political factors and social impact. The organization's staff assured that inflation will decrease in the short term and the economy will rebound towards the end of the year.
By Mariano Boettner
The International Monetary Fund assured that it agreed with the Government on a roadmap to eliminate the exchange rate this year and other measures such as the highest exchange rate for exports and, at the end of the year, the PAIS tax on imports. In its latest staff report published this Thursday, the organization considered that Javier Milei 's economic plan is exposed to risks due to "a complex political and social context, with a fragmented Congress, falling real wages and high poverty ," it mentioned.
The technical report, approved this Wednesday afternoon by the board, provided an x-ray of the libertarian government's economic plan. He summed it up by stating that the fiscal anchor is strong although it has one leg that depends on Congress, that the devaluation helped rebuild reserves but that high inflation could lead to an exchange rate delay that requires another adjustment in the official dollar. In addition, he anticipated that interest rates in pesos should migrate towards positive territory in the medium term.
“There are risks that the policy package will not initially meet its objectives, which will require agile policy formulation, contingency planning and the need to further expand social assistance . That said, even if the authorities were unable to fully meet their ambitious policy goals, important steps would still have been taken to correct Argentina's serious imbalances. In this context, business risks remain important , although the potential for large short-term delays has decreased significantly,” the Monetary Fund mentioned in its staff report approved by the board.
In that sense, after describing the economic plan of Milei and Minister Luis Caputo, the IMF assured that it agreed with the Government on a calendar to release exchange controls . The Executive Branch agreed with the Fund to have a concrete roadmap by mid-year, but promised that it hopes to lift all restrictions at some point this year. On that list is the exchange rate but also others such as the export scheme 80% to the MULC and 20% to the CCL, which gives a higher exchange rate and the PAIS tax on imports.
On the other hand, the IMF said that the Government was committed to maintaining exchange competitiveness, which will be affected by the advance of inflation given an exchange rate that is updated at 2% monthly. “Following the initial large devaluation in mid-December, the authorities have committed to maintaining an exchange rate policy consistent with reserve accumulation objectives and a market-based regime that avoids the previous approach of managing parallel currency markets and future,” mentioned the staff report.
Regarding economic activity this year, the staff report considered that “strict fiscal policies and the initial exchange rate correction” will have an impact on the economy that will lead to the 2.8% recession expected for this year, along with an acceleration of inflation “in the short term as relative price imbalances and other price controls are eliminated, although disinflation is expected to kick in shortly thereafter ,” the Fund noted.
“The current account will enter a surplus (4 percentage points of GDP this year), supported by a rebound in agricultural exports and further improvements in the energy balance, together with a strong compression of imports. The economy would begin to recover in late 2024 , as initial obstacles dissipate and distortions are eliminated, although policies will need to remain strict to preserve current account surpluses and support greater reserve accumulation," the agency estimated. .
Regarding fiscal adjustment measures , the IMF supported the announcement of complete elimination of the deficit this year, which it projected will be sustained by “a combination of temporary taxes (related to trade) and efforts to reduce administrative costs, subsidies to energy and transportation, discretionary transfers to provinces and state-owned companies, and infrastructure spending.” A weak point of some of them, the organization recognized, is that they will depend on the approval of Congress.
In any case, one of the central discussions that took place during the last technical review was to reinforce social aid items to alleviate the effect of the crisis. “Authorities have significantly strengthened social assistance through child benefit and food stamp programs, while moving away from social programs distributed through intermediaries and preserving the real value of pensions through discretionary bonuses.” . Further expansion of assistance may be necessary as conditions evolve,” the IMF warned.
In a statement after the board session, the body considered that “the path to stabilization will be challenging and will require strong policy implementation and agile policy formulation. “Clear communication and well-targeted social assistance will be essential to generating social and political support for the program.”
Regarding exchange rate policy, after the devaluation of December 13, the IMF requested that the conditions allow the BCRA to continue accumulating reserves. “After the realignment of the exchange rate, exchange rate policy should continue to ensure reserve accumulation objectives . Important steps are being taken to address the large trade debt overhang and create a more transparent and rules-based import system. “Furthermore, the authorities have committed to eliminating remaining distortive exchange restrictions and multiple monetary practices in the near term, and to develop plans to gradually dismantle capital flow management measures, as conditions permit,” the director continued. IMF manager in reference to the exchange rate .
The Monetary Fund approved the disbursement of USD 4.7 billion to Argentina and the Government activated the payment of maturities to the organization itself. The Central Bank's reserves already reflected the payment of USD 1,945 million this Wednesday and another USD 840 million of interest payments will be subtracted on Thursday. The foreign exchange transfer made by the IMF will allow the Executive Branch to cover payment obligations until April .
Source:
El FMI afirmó que el Gobierno eliminará el cepo este año y que debe evitar un atraso cambiario
El Fondo mencionó que el plan económico está expuesto a riesgos por factores políticos y el impacto social. El staff del organismo aseguró que la inflación bajará en el corto plazo y la economía repuntará hacia fin de año
www.infobae.com
February 01, 2024
The Fund mentioned that the economic plan is exposed to risks due to political factors and social impact. The organization's staff assured that inflation will decrease in the short term and the economy will rebound towards the end of the year.
By Mariano Boettner
The International Monetary Fund assured that it agreed with the Government on a roadmap to eliminate the exchange rate this year and other measures such as the highest exchange rate for exports and, at the end of the year, the PAIS tax on imports. In its latest staff report published this Thursday, the organization considered that Javier Milei 's economic plan is exposed to risks due to "a complex political and social context, with a fragmented Congress, falling real wages and high poverty ," it mentioned.
The technical report, approved this Wednesday afternoon by the board, provided an x-ray of the libertarian government's economic plan. He summed it up by stating that the fiscal anchor is strong although it has one leg that depends on Congress, that the devaluation helped rebuild reserves but that high inflation could lead to an exchange rate delay that requires another adjustment in the official dollar. In addition, he anticipated that interest rates in pesos should migrate towards positive territory in the medium term.
“There are risks that the policy package will not initially meet its objectives, which will require agile policy formulation, contingency planning and the need to further expand social assistance . That said, even if the authorities were unable to fully meet their ambitious policy goals, important steps would still have been taken to correct Argentina's serious imbalances. In this context, business risks remain important , although the potential for large short-term delays has decreased significantly,” the Monetary Fund mentioned in its staff report approved by the board.
In that sense, after describing the economic plan of Milei and Minister Luis Caputo, the IMF assured that it agreed with the Government on a calendar to release exchange controls . The Executive Branch agreed with the Fund to have a concrete roadmap by mid-year, but promised that it hopes to lift all restrictions at some point this year. On that list is the exchange rate but also others such as the export scheme 80% to the MULC and 20% to the CCL, which gives a higher exchange rate and the PAIS tax on imports.
On the other hand, the IMF said that the Government was committed to maintaining exchange competitiveness, which will be affected by the advance of inflation given an exchange rate that is updated at 2% monthly. “Following the initial large devaluation in mid-December, the authorities have committed to maintaining an exchange rate policy consistent with reserve accumulation objectives and a market-based regime that avoids the previous approach of managing parallel currency markets and future,” mentioned the staff report.
Regarding economic activity this year, the staff report considered that “strict fiscal policies and the initial exchange rate correction” will have an impact on the economy that will lead to the 2.8% recession expected for this year, along with an acceleration of inflation “in the short term as relative price imbalances and other price controls are eliminated, although disinflation is expected to kick in shortly thereafter ,” the Fund noted.
“The current account will enter a surplus (4 percentage points of GDP this year), supported by a rebound in agricultural exports and further improvements in the energy balance, together with a strong compression of imports. The economy would begin to recover in late 2024 , as initial obstacles dissipate and distortions are eliminated, although policies will need to remain strict to preserve current account surpluses and support greater reserve accumulation," the agency estimated. .
Regarding fiscal adjustment measures , the IMF supported the announcement of complete elimination of the deficit this year, which it projected will be sustained by “a combination of temporary taxes (related to trade) and efforts to reduce administrative costs, subsidies to energy and transportation, discretionary transfers to provinces and state-owned companies, and infrastructure spending.” A weak point of some of them, the organization recognized, is that they will depend on the approval of Congress.
In any case, one of the central discussions that took place during the last technical review was to reinforce social aid items to alleviate the effect of the crisis. “Authorities have significantly strengthened social assistance through child benefit and food stamp programs, while moving away from social programs distributed through intermediaries and preserving the real value of pensions through discretionary bonuses.” . Further expansion of assistance may be necessary as conditions evolve,” the IMF warned.
Board approval and disbursement
After approving the technical review and giving the green light to the disbursement this Wednesday, the managing director of the IMF Kristalina Georgieva assured that the Government of Javier Milei will need more measures to ensure the stabilization of the economy and that the path to achieve it "will be challenging" , al time that will require “well-directed social spending” to avoid the impact of the crisis on social indicators.In a statement after the board session, the body considered that “the path to stabilization will be challenging and will require strong policy implementation and agile policy formulation. “Clear communication and well-targeted social assistance will be essential to generating social and political support for the program.”
Regarding exchange rate policy, after the devaluation of December 13, the IMF requested that the conditions allow the BCRA to continue accumulating reserves. “After the realignment of the exchange rate, exchange rate policy should continue to ensure reserve accumulation objectives . Important steps are being taken to address the large trade debt overhang and create a more transparent and rules-based import system. “Furthermore, the authorities have committed to eliminating remaining distortive exchange restrictions and multiple monetary practices in the near term, and to develop plans to gradually dismantle capital flow management measures, as conditions permit,” the director continued. IMF manager in reference to the exchange rate .
The Monetary Fund approved the disbursement of USD 4.7 billion to Argentina and the Government activated the payment of maturities to the organization itself. The Central Bank's reserves already reflected the payment of USD 1,945 million this Wednesday and another USD 840 million of interest payments will be subtracted on Thursday. The foreign exchange transfer made by the IMF will allow the Executive Branch to cover payment obligations until April .
