A departing International Monetary Fund (IMF) mission team says talks with Argentina over a new financing plan are progressing well, with the two parties beginning to “delineate the contours” of a new deal.
A statement offering an update on talks was issued late Friday, as IMF officials flew out of Buenos Aires after 10 days of meetings with government officials, business chambers and civil society leaders.
Negotiations were thrown into disarray too after one IMF official tested positive for Covid-19 last week, forcing all those who had engaged in talks into preventative isolation, including several government officials. However, the IMF staff member then tested negative just a few days later.
“The IMF staff team and Argentine authorities started delineating the contours of an IMF-supported programme that could back the government’s plans to address the country’s deep economic and social challenges, which have been aggravated by the Covid-19 pandemic,” read the statement, co-signed by Julie Kozack, the Fund’s deputy director for the Western Hemisphere, and Luis Cubeddu, mission chief for Argentina.
The government is hoping to renegotiate repayments on a US$44-billion loan granted to the Mauricio Macri administration by the Fund in 2018. The credit line was originally meant to be US$57 billion, but President Alberto Fernández halted disbursements when he took office in December 2019. The first repayments are due in September 2021.
Thanking the government for its support, the mission team said they welcomed “the authorities’ intention to request an Extended Fund Facility (EFF) arrangement, and to underpin it with a broad political and social consensus.”
Economy Minister Martin Guzmán confirmed last week that Buenos Aires would ask the Fund for an EFF scheme as part of the government's efforts to delay repayments on the US$44 billion it owes the multilateral organisation. Typically, EFF schemes require economic reforms as part of any deal.
Such a programme would give the country at least four-and-a-half years to begin paying down its debt once it is approved, Guzmán told reporters, though reports since suggest the Economy Ministry is seeking a decade-long grace period on repayments.
The Fund’s mission team said Friday that “good progress” had been made towards “defining the initial elements” of such a programme, adding that “discussions are expected to continue virtually” in the coming weeks.
“There was a shared view that tackling Argentina’s near and medium-term challenges will require a carefully balanced set of policies that fosters stability, restores confidence, protects Argentina’s most vulnerable, and sets the basis for sustainable and inclusive growth,” the Fund said, hinting that the two parties' priorities were aligned.
Not everyone in the government’s camp is happy with the IMF’s presence in Buenos Aires, however. Last week, senators from the Peronist bloc in the upper house called on the Fund to “refrain from conditioning economic policy” during its talks with the government.
In a missive addressed to IMF Managing Director Kristalina Georgieva, the senators also demanded answers over what it alleged were irregularities in the 2018 decision to grant a record credit-line to the Macri administration. The senators implied that the Fund had been used as a political tool to support the former president’s bid for re-election.
The IMF mission team said it met with government ministers of economy, defence, productive development, social development, labour, interior, public works, security and environment, as well as Central Bank chief Miguel Pesce. Representatives also met Lower House Speaker Sergio Massa, Vice-Cabinet Chief Cecilia Todesca and a host of academics, business chambers, civil society leaders and provincial government officials.
The IMF forecasts that Argentina’s GDP will contract by 11.8 percent this year, with the country in its third year of recession. More than 40 percent of the population now lives in poverty, with unemployment running at over 10 percent and inflation more than 37 percent over the past 12 months
Speaking over the weekend, Guzmán said that the aim was to "shore up economic stabilisation."
"With the IMF's mission team, we are advancing in the guidelines of the programme that will replace the previous failed programme," he said, aiming a dig at the Macri administration.