International Monetary Fund (IMF) Director for the Western Hemisphere Ilan Goldfajn admitted inflation guidelines outlined in Argentina's recent agreement with the financial agency needed to be modified to reflect a steep variation in prices.
According to Goldfajn, the Argentine Government will have to acknowledge that for the second consecutive year, prices went up by above 50 percentage points. In addition to that, the Brazilian economist also acknowledged he was harboring doubts regarding the fulfillment of fiscal, monetary, and reserve accumulation goals.
The program has assumptions and targets. Inflation is an assumption and these can change due to new shocks in the global economy, Goldfajn said.
His statements were in line with Argentina Economy Minister Martín Guzmán's assessment that the quantifiable goals will not be modified, although some politicians from the ruling Frente de Todos (FdT) see difficulties in reaching the fiscal, monetary, and reserve accumulation goals.
Recalculating inflation will lead to a budget readjustment before the first quarterly review, in addition to the political repercussions of admitting to the inflationary turmoil.
According to private consultants, inflation in Argentina for the year 2022 is forecast at 57%. The IMF agreement assumed an inflationary rate between 38 to 48%.
It is logical to make a recalibration of the Budget. Now we are working with the extension of the 2021 law, updated towards June 30 of that year. And it is obvious that values change because there was an inflation of around 50% to which the war scenario and its consequences must be added, an Economy Ministry source was quoted by BAE Negocios as saying.
The announcement of the income support package triggered the idea that the goals will not be met and that there will be more issuance [of money], Agustín D'Attelis told the newspaper.
Other sources quoted by BAE Negocios foresee additional social subsidies will bring on an additional fiscal cost of 1.2% of the GDP, which would prompt the need to request some sort of waiver from the IMF, unless the controversial windfall tax is approved, which would represent revenues around 0.41% of the GDP.
The current evolution of Argentine Central Bank reserves will lead to a breach of the target, even with the extra disbursement from the IMF, which would lead to a devaluation of the official exchange rate, D'Attelis pointed out. (Source: BAE Negocios)