Argentina’s Deputy Economy Minister Gabriel Rubinstein and the portfolio's chief adviser Leonardo Madcur flew to the United States on Monday night on a mission to close the latest staff review of the country’s US$44.5-billion debt deal with the International Monetary Fund (IMF).
Approval of the fourth quarterly review of Argentina’s Extended Fund Facility (EFF) deal is of high importance for President Alberto Fernández’s government, which needs to strengthen Central Bank reserves at a time of low foreign currency inflows and a punishing drought that has dramatically slashed projections for the agricultural harvest.
If IMF staff sign off on the deal, followed by the multilateral lender’s board, Argentina will receive a new disbursement of US$5.4 billion in fresh funds that will boost the state’s coffers.
Technicians from Argentina’s government and the International Monetary Fund have been poring over the country’s books from the fourth quarter of 2022. The country closed out last year with a primary deficit (excluding debt servicing) equivalent to 2.4 percent of Gross Domestic Product (GDP), an improvement of one tenth of a percentage point on the agreed target of 2.5 percent.
For 2023, Argentina’s primary deficit target needs to drop to 1.9 percent. Economy Ministry staff would like to discuss this during the upcoming talks in Washington, given the likely impact of the drought on the agricultural harvest and subsequently for foreign exchange earnings.
Production of soy, the country’s leading export product, is set to fall to its lowest volume in 14 years, the Rosario Stock Exchange reported earlier this month.
As well as this, officials will also highlight the ongoing conflict between Russia and Ukraine, with no end seemingly in sight, and the impact of that on energy prices and transport and logistics costs worldwide.
Rubinstein and Madcur took part in talks back in early February, both online and in-person. The head of the IMF delegation, Luis Cubeddu, participated remotely.
In the lead-up to those sessions, Economy Minister Sergio Massa accused the IMF of reneging on a commitment to fully review and consider the domestic impact of the war in Ukraine..
"Argentina fulfilled its programme, but the IMF is not fulfilling its commitment to Argentina to review 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.
Speaking at the recent G20 Summit in Indonesia, the minister said that the war carried “a very high cost for the countries of the southern hemisphere," claiming that Argentina is US$5 billion worse-off as a result and that “there is no global arena where this issue is being discussed.”
Fuel imports amounted to US$5.8 billion in 2022, compared to the US$2 billion projected before the start of the war, resulting in a net increase of US$3.8 billion, according to the government.
In addition to those costs, increases in the price of major commodities means that more foreign exchange was needed to import fuels, including those used for energy supply during 2022.
Massa’s portfolio says that when the conflict broke out last February 24, Argentina was forced to renegotiate its contract with Bolivia for the importing of natural gas, with prices rising more than 100 percent as a result. Electricity purchases from Brazil also rose.
Meanwhile, fertiliser prices have risen by an average of 93 percent, according to the government. Nearly 70 percent of such products are imported by local agricultural producers.