Growing poverty: Argentina government wants to negotiate a scope for effective social policy in the rescheduling negotiations with the IMF.
Photo: imago images/Roberto Almeida
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“The word adjustment has been banned from the discussion with the International Monetary Fund (IMF), for us the secret is growth.” On Wednesday, Argentina’s President Alberto Fernández clearly rejected an austerity policy for debt repayment at the IMF. Sustainable repayment of liabilities can only be achieved with a growth strategy and rising real wages, the President said when he presented the negotiating position to the IMF.
In 2018, the fund granted the then liberal-conservative government of President Mauricio Macri a loan of US $ 57 billion, of which US $ 44 billion was disbursed. It is by far the largest loan program that the IMF has ever made available to a member country. So far, around $ 5.2 billion in principal and interest has been repaid. Around 19 billion dollars will be due in 2022, another 20 billion dollars in 2023 and another five billion dollars in 2024. The consensus is that these sums cannot be repaid.
“The fund itself has stated that it is incomprehensible how such a loan could even be granted with such conditions,” added President Alberto Fernández, referring to an ex-post evaluation of the record loan published by the IMF shortly before Christmas. The credit at the time was primarily aimed at regaining market confidence by reducing the budget deficit, reducing inflation and increasing foreign exchange reserves, it said. “None of the goals were achieved. The program was a failure «, so the strikingly self-critical conclusion of the IMF.
However, it was already clear to the IMF in October 2018 that debt servicing was on shaky ground. “The general assessment of the IMF staff is that Argentina’s debts are sustainable, but not with a high degree of probability,” said the fund’s first ex-post evaluation. Such statements and assessments strengthen the government’s negotiating position in Buenos Aires today.
Debt renegotiation is proving difficult. Economics Minister Martín Gúzman said that there was still no agreement on the subject of adjustment and austerity policies. “The country’s economic recovery is our top priority,” affirmed Gúzman. First of all, the prerequisites would have to be created in order to be able to repay the debts at all, said the Minister of Economics. Therefore, the annual debt repayment should be reduced to a level that allows investments by the state budget and at the same time a financial scope for an effective social policy. Since the IMF statutes exclude debt relief, the government is relying on the extension of the deadlines and a reduction in annual repayments.
“The foreign debt caused by Macri will weigh on generations of Argentines and the next few governments,” said Interior Minister Wado de Pedro. But despite all the criticism, the government is trying to get the support of the political opposition. Any newly negotiated program with the IMF must be approved by Congress. And there, since the new election last November, the opposition has been in the majority, even if it is split up into ten parliamentary groups in the House of Representatives, from right-wing extremists to left-wing revolutionaries. The first exclamation mark of the new balance of power was set in December during the debate on the 2022 budget. Despite the government’s zealous efforts, the opposition unanimously rejected the draft in the House of Representatives. “If the budget is rejected, the agreement with the IMF will fail,” President Alberto Fernández had warned. After the vote was lost, the president tried to limit the damage to IMF boss Kristalina Georgiewa via video.
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