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The devastating consequences that Martín Guzmán projected if Argentina does not reach an agreement with the IMF

The 2022 Budget bill assumes that Argentina will agree with the Monetary Fund (IMF). And in the message to Congress, to which accessed by parliamentary sources, alert about the dramatic consequences that Argentina would suffer if that understanding does not manage to close.

The roadmap for 2022 does not contemplate the payment of almost US $ 20,000 million, or 4% of GDP, which should be canceled next year with the international body. This is how the president himself had advanced Alberto Fernandez and the Minister of Economy, Martin Guzman, in the act that they shared shortly before the crisis broke out in the Cabinet with the resignations of a dozen officials who respond to Cristina Kirchner.

Either supposes some partial payment to the international organization, thus reaffirming Guzmán’s intention that the new program grant a grace period in rescheduling. The line they are negotiating with Washington points to a extended facility agreement, the longest line that the Fund currently has and that grants a repayment of 12 semi-annual installments between 4 and a half years and 10 years.

Yes explicit that will use the extraordinary funds (DEG) that the IMF turned around in late August to payr the maturities of this year, the first scheduled for the next Wednesday 22 and the other at the end of the year.

But, Guzmán warned, Room for maneuver of fiscal policy is limited since the beginning of the government, in December 2019 in the face of “an unsustainable schedule of debt maturities in foreign currency”.

In that sense, in the project, he warns that pay the entire amount committed in the 2018 agreement “would place the National State in a serious situation, which would force the postponement of essential public policy priorities ”.

Social spending, subsidies to tariffs and public works they would be the ones that suffered the greatest cuts in funds in this context, he says. And direct impact to reserves, dollar and the unsustainable inflationary pressure.

“The Congress is informed of the devastating consequences for Argentina that would entail the payment of these obligations during 2022 ″, it is specified.

Remarks that if advance In this scenario, “a significant reduction in budget items that are a priority should be promoted, generating in all probability a social crisis of absolutely disproportionate magnitudes in relation to the history of the country ”.

In that order, exemplify with two strong fit scenarios that you should implement in order to meet next year’s committed maturities:

  • Scenario A: would imply about the 2022 Budget a reduction of investment in infrastructure of $ 1.3 trillion and another cut by $ 1.1 trillion in economic subsidies. “This would imply paralyze public works key sectors of the economy for recovery, simultaneously with a rate increase even higher than that made by the previous management. In turn, laws such as educational financing and science and technology, among others, would be suspended.
  • Scenario B: Another variant presented by Guzmán to exemplify the magnitude of the adjustment that would imply paying the established maturities to the IMF it points directly to social spending. In that case, they are reduced allocations, social programs and items associated with Health and Education. “Compensating for a similar amount the items associated with social, education and health policies, would imply reducing the annual budget of AUH and other allowances paid by the Considered, social programs such as Empower Work, food policies, Progresar Scholarships, REPRO II and vaccines against coronavirus, as well as all kinds of current transfers to Provinces and Universities ”.

According to Guzmán’s vision, any of these scenarios “will not only slow down economic growth, but work opportunities and progress for society will be postponed.”

“Argentina it would face a social and economic disaster of virtually unpredictable magnitude. Faced with a shock of such magnitude, the unpredictability would be capital and therefore it is not feasible to forecast with an informative validity range the consequences that facing the debt commitments with the IMF assumed by the previous administration would entail in terms of a fall in the activity, employment, real wages, increased poverty, inequality, and in terms of opportunities for human and social development in our Nation ”, it was argued.

In his argumentation, he added the “shock in front of the Bookings international and the exchange, give place to unsustainable inflationary pressures ”.

“That so noxious road for the present and the future of our people, we dismiss it. On the contrary, it is proposed to give continuity to an economic model that puts the recovery of productive activity with equity at the center, and whose fundamental axis is to generate work, knowledge and promote opportunities in a federal way ”, completes the text that already entered Congress. He reinforced that for this he points to “a expansive fiscal policy”.

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