In the midst of the critical situation that emerged following the results of Sunday 12 September primary election, and the cabinet reshuffle a week later, the government of Argentine president Alberto Fernandez nevertheless confirmed that this week it will honor a US$ 1,9bn repayment plus interests to the IMF.
Financial markets are anxious to decipher the next steps in financial issues of the new government given the different positions, particularly that between Economy minister Martin Guzman, who is mostly absorbed by negotiations with the IMF, and vice-president Cristina Kirchner who really runs the political show and is of the opinion that if midterm elections are to be won (November 14), and primary results reversed, the government must promote an expansive economy, boost consumption, increase salaries and pensions, maintain subsidies.
Last week the Fernandez administration sent its Budget 2022 to Congress, austere by Argentine open-hand tradition, which forecasts a reduction in the fiscal deficit, gradually eliminating subsidies to public utilities services (power, cooking gas), but these measures are not favored by the bunker or followers of Cristina Kirchner.
However Cristina Kirchner is aware that sometime after the November election, the sooner the better, Argentina must reach a debt repayment agreement with the IMF, if it wishes to have access to fresh funds. The ongoing negotiations have been conducted by minister Guzmán, and therefore contrary to Buenos Aires media speculation, the vice-president called the minister telling him it was not her intention to sack him, rather the contrary.
In the last four months of this year Argentina must transfer to the IMF, US$ 3,8bn plus 400 million in interests, with half of it due Wednesday, 22 September. The rest will have to be disbursed the day before Christmas. Apparently the Argentine government is planning to take advantage of the recently distributed SDRs by IMF which for Argentina meant the equivalent of US$ 4,4bn, even when it is controversial if the distributed funds can be used for that purpose.
Furthermore the budget sent to Congress does not contemplate funds to repay the IMF in 2022, which could liberate some US$ 19bn, but a big BUT, IMF should be willing to accept a repayment calendar of the US$ 44bn awarded to the previous government of Mauricio Macri, of at least ten years, which could also mean changes in IMF rules.
IMF also demands that the agreement signed with Argentina is also supported by the opposition, which in the current political electoral scenario seems quite challenging, In effect if the primary election, is reflected in the results of the November election, the new congress to be sworn in on 10 December could mean Cristina Fernandez not only loses some seats in the Lower House but most importantly control of the Senate. And with Congress in the hands of the opposition it will a completely different ball game.