Argentina may need to ask for ‘forgiveness’ for not fulfilling the IMF’s goal

Country needed to accumulate reserves to reach a minimum value stipulated in the agreement made with the fund. As it failed, it is expected to ask the IMF to disregard this obligation. Headquarters of the Argentine Ministry of Economy in Buenos Aires Irina Dambrauskas/ Reuters to Argentina, the largest debtor of the International Monetary Fund (IMF), will once again need to ask for forgiveness (Waiver, in market jargon) – this time because he has not fulfilled the target of foreign exchange reserves included in the new $ 20 billion agreement. 🤔 What is Waiver? Waiver is basically an official authorization so that the parties involved do not need to follow a rule that would normally be mandatory. In the case of Argentina, part of the IMF agreement required the country to reconstruct the Central Bank’s currency reservations. As a measure has not been fulfilled, the country must ask the fund to disregard this obligation. According to analysts and former employees interviewed by Reuters, it is possible that the country succeeds and can be able to withdraw this obligation. (Understand below) Argentina closed its 23rd Agreement with the IMF in April, with the objective of refinating a previous $ 44 billion treaty, and to give President Javier Milei’s government financial capacity to dismantle rigid capital controls. The agreement set economic targets, including the elimination of the fiscal deficit, a lower inflation rate and the reconstruction of Central Bank currency reservations, which were in the red when Milei took office at the end of 2023. The government was able to reduce inflation with hard austerity measures and took more difficulty to accumulate reservations, which would be below IMF requirements. However, former Autorities from the country and the IMF said Milei did enough to gain some maneuvering space and that spending cuts managed to reverse the years when the country had a large fiscal deficit, gaining market support and applause from IMF leaders. “I think they will forgive [o descumprimento da meta de reservas] Even if they ask more later, “Claudio Loser, former IMF director for the Western Hemisphere, told Reuters. This would probably come in the form of a” Waiver “, approving the first review of the program, for which an IMF technical team arrived in the country on Tuesday (24). That the next disbursement, about $ 2 billion, would require the forgiveness of the IMF. “Most likely the disbursement will not be automatic, but will require a WAVER,” Marx said. [no mercado de câmbio] accumulating reserves. This has not happened, at least so far. I think they will say how they plan to face the coming months, especially between now and the end of the year. “The Ministry of Economy and the presidency did not respond to a request for comment. The Central Bank declined to comment and said that conversations with the IMF technical team were just starting. An important factor for” WAVER “is the strong history of Milei in the cutting of public spending. To reach a surplus goal of 1.6% of GDP. Economy Minister Luis Caputo said this month that the accumulation of reserves is no longer as important as before, with greater weight fluctuation and the Central Bank capitalized, and highlighted the support of the IMF to Milei reforms. and $ 1 billion below the agreed reserve target, but this should not block the disbursement of new funds. “This government has shown great financial capacity to solve problems. It may happen that we are $ 500 million or $ 1 billion below (from the reserve target), but this will not cause major problems in the background, “I said.” I think it will be approved quickly and can take a week or two to disburse, “he added.

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