Economy Minister Martín Guzmán told staff from the International Monetary Fund on Friday that Argentina has met the initial targets outlined in the country’s US$44.5-billion debt restructuring deal, though he warned them the government will not change course and will continue to “prioritise social protection spending” amid soaring inflation.
Guzmán met with the Fund’s Managing Director Kristalina Georgieva on the sidelines of the IMF-World Bank Spring Meetings in Washington on Friday. According to reports, the conversation between those present was dominated by Argentina’s runaway inflation, which jumped to 6.7 percent in March – a 20-year monthly high.
Prices in Argentina have increased by 55.1 percent over the last 12 months and by 16.1 percent so far this year.
In recent statements, Georgieva warned that price hikes are putting the restructuring plan at risk, hinting that some of the deal’s targets may have to be withdrawn. April’s inflation rate could be key to that conversation – government sources admit that the figure will still be high, exposing the ineffectiveness of some of the measures taken.
Guzmán, however, was bullish as he spoke to the press after Friday’s meeting.
“We have frequent dialogue with Kristalina Georgieva, almost weekly. In this encounter the week’s work was reviewed and the good progress which has been verified in the implementation of the agreement with the Fund,” the minister told reporters.
“The meetings analysed the international context and the implications of the Ukraine war, which is generating inflation at global level. There are countries which did not have inflation and are now into double digits. There is an international consensus to avoid the consequences of the crisis for distribution. It is Important for governments to prevent inequality [from] increasing and to promote a shared economic recovery.”
Addressing the debt deal, Guzmán said that “good progress” had been made. “We’ve seen the fiscal picture moving in line with the agreed, holding the printing of money below 0.15 percent of the gross domestic product,” he said.
"Our international reserves have grown,” he continued, “with the economic programme moving in line with the planned. The economy continues growing firmly, creating jobs.”
Guzmán also revealed that he had told the IMF that Argentina’s targets for the first quarter had been met in large part thanks to 229 billion pesos entering government coffers from property taxation.
Analysts understand that owing to the changes to world macro-economics introduced by Russia’s invasion of Ukraine, Argentina’s IMF deal will need to adjusted. Most expect that to happen after next month’s review.
The 38 to 48 percent inflation target outlined in the deal is considered impossible to reach, due to the increased spending imposed by higher energy prices.
Paris Club debt
Reports at press time also said that Guzmán had held brief talks with representatives from the Paris Club on the sidelines of the IMF-World Bank meetings.
Argentina wants to close negotiations over a new payment plan to settle a US$2-billion debt it has with the rich group of lenders. As part of its previous agreement, the government has committed to making partial payments to the club’s members, proportional to payments it makes to other bilateral creditors during the 30-month period of the country’s programme with the IMF.
That’s in line with the conditions the two sides reached last year as well, when the US$2-billion repayment was postponed. Between last July and March, Argentina made partial payments to the Paris Club totaling US$430 million.