The keys to the agreement with the IMF: less primary surplus, more reserves and “living with our own”

On the fiscal level, the statement affirmed that the zero deficit will continue to be the fundamental pillar of the program, in line with a primary surplus of 1.4% of GDP this year and backed by “rigorous and continuous” spending control, while guaranteeing specific social assistance. This estimate represents a decrease in the primary surplus of the 2.2% expected in the last review, last July.

The primary surplus is income minus expenses, excluding interest payments on debt. The Government has been facing more difficulties in maintaining surplus accounts. With collections falling, Luis Caputo ordered the ministries to reduce spending, which generated conflicts with collective companies, PAMI doctors and governors.

“Over time, well-planned reforms to the tax, pension and fiscal framework are expected to further improve the quality and strength of this fiscal pillar,” the Fund said.

On the other hand, the statement anticipates that monetary policy will continue to be strengthened, with “preventive measures” to contain interest rate volatility and “improve” monetary policy transmission and credit allocation. The Central Bank began a relaxation of monetary policy with a reduction in rates due to the record increase in loan defaults and the drop in activity.

However, the Fund stated that monetary policy “will remain sufficiently strict” to continue supporting the disinflation process, with the expansion of exchange bands and “greater transparency” through publication of a quarterly report on the performance of the monetary program. For some specialists, it is an indirect request for greater consistency in the Central Bank’s policy.