Financial mismanagement: Fernández-era debt reaches 80% of the IMF loaned to Argentina

Another development of the economic crisis in Argentina: the debt of the Central Bank of the country rose US$ 36 billion (almost R$ 187 billion) under Alberto Fernández. The amount represents 80% of the International Monetary Fund (IMF) credit directed to Argentina (of almost US$ 45 billion or R$ 233 billion).

For two years with an expansive monetary policy, that is, growth in the supply of the Argentine peso , the government continues to increase its expenses and its debts (liabilities), to the point of reaching a worrying lack of control and the consequences are knocking at the door: an inflation that exceeds 64 % per annum and the deterioration of the Central Bank’s reserves.

According to economist Fernando Marull, in an interview with the newspaper La Nacion, when Fernández arrived at Casa Rosada, the stock of liabilities represented 5% of GDP and today they reach %.

“What we are seeing are the consequences of having issued 11 points of GDP in two years. This is not free and here you can see the consequences of that”, said the analyst.

The growth of these expenses by the Argentine Central Bank exceeds the indicators of 2018, when the exchange rate race exploded in the government of Mauricio Macri.

Few outputs in Argentine economic policy

“Reducing inflation implies reducing monetary issuance, which is currently the only source of government funding to respond to social discontent,” said Argentine economist Juan Luis Bour, director of the Buenos Aires-based Latin American Economic Research Foundation.

He also indicated that the Argentine economy has “a little room for manoeuvre”, since the issuance of money (money printing) goes against the fiscal objectives signed by the agreement with the IMF. The document foresees, on the part of Argentina, a reduction of the budget deficit to 0.9% of GDP in 2024, against the current around 4%.

In addition to Furthermore, a weak foreign policy increases the country’s lack of credibility, raises prices and sows panic in financial markets. The “blue dollar”, which circulates in the informal market, reached 350 pesos, more than double its value at the official rate.

There are no dollars to pay

According to the lawyer and professor at the University of Buenos Aires Flavio Gonzalez, Argentina’s biggest problem today is not the size of its external debt compared to its GDP , but the lack of dollars to pay this debt. “There are countries with a proportionally higher debt, but here there are no dollars to meet these obligations”, he explained.

The high spending policy of the State is, according to Gonzalez, the main economic mistake of the Kirchnerist administrations. “The economic condition is stable, the problem is always the fiscal deficit”, he reinforced.

The rise of the dollar in Argentina is mainly related to the unfavorable economic scenario, uncertainties after the resignation of Martín Guzmán of the post of Minister of Economy, in addition to the temporary restrictions on the foreign exchange market imposed by the country.

In times of economic instability, consumers and investors tend to seek stronger currencies, such as the dollar. As a result, the demand for currency in the parallel market is greater.

The more “blue dollar” is in circulation in a country, the more fragile the system is: more susceptible to crimes, money laundering operations money and tax evasion. In addition, it makes it even more difficult to control what enters and leaves the country.

Two weeks ago, the Central Bank of Argentina ordered limits on the obtaining of dollars by citizens and the possession of certain shares by companies that operate in the formal exchange market.

Argentineans can only buy up to US$ 200 (about R$ 1.

) per month in cash. Companies, on the other hand, only have access to a volume of foreign exchange equivalent to that imported last year plus 5%. If more dollars are needed, they will need to raise funds via credit. The intention of the measures imposed by the government is to stop the high flight of dollars and the loss of Argentina’s reserves.

Unfavorable political context

A waltz of economy ministers try to change the course of the Argentine crisis. In 27 days, the country had three people representing the portfolio.

Martín Guzmán resigned on July 2, pressured by Vice President Cristina Kirchner, who was opposed to the former minister’s moves to control the fiscal deficit. He was largely responsible for the agreement with the IMF.

Two days later, Silvina Batakis took over the ministry appointed by Kirchner, promising to “seek balance in public accounts”, but her populist measures did not please her. and maintained their distrust in the market.

Last week, the inauguration of Sergio Massa, who was at the head of the Chamber of Deputies and former minister of Cristina, was announced.

Gonzalez points out that, despite the economic issues that haunt the country today, Argentina’s political problems are what make “there are no solutions”.

For Gonzalez, regardless of who is in the ministry or even in the presidency, who runs the country is Cristina Kirchner. “I do not believe that this government can meet the goals with any minister because it is not in the Kirchnerist DNA to fight the fiscal deficit”, warned Gonzalez.

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