The US Treasury rejected the request to eliminate… / Argentina News

In the last few hours, the US Treasury Department rejected an appeal by 18 Democratic lawmakers who want the International Monetary Fund (IMF) to end its practice of charging significant surcharges, mostly to low- and middle-income countries. , to larger loans that are not paid off quickly.

The Monetary Fund estimated that borrowing countries will pay more than $4 billion in surcharges on top of interest and fee payments from the start of the pandemic through the end of 2022.

The explanation for the refusal

For his part, the Biden administration’s undersecretary of the Treasury for legislative affairs, Jonathan Davidson, told lawmakers that the surcharges were intended to address the increased risk to shareholders involved in lending large sums to member countries.

They don’t apply to the world’s poorest countries, Davidson added, and the loans made were often at rates well below market rates.

“Surcharge revenues for those countries that pay them help create precautionary balances to protect IMF shareholders against potential losses,” Davidson wrote in his response to a Jan. 10 letter from lawmakers, a copy of which is available today. was seen by Reuters.

“From the Treasury’s point of view, the surcharges must be seen in the context of the IMF’s balance sheet, more importantly, its ability to absorb potential losses from non-payment of its loans,” he said.

It is worth mentioning that Washington’s opinion is vital since the United States is the largest shareholder in the global credit institution, which is financed by its member states; although Germany, France and Great Britain have been open to reviewing the policy of surcharges.

As for Argentina, which is expected to spend some $3.3 billion in surcharges between 2018 and 2023, it has repeatedly called for temporary surcharge relief given the COVID-19 crisis, but board members IMF executive remain divided on the issue in general.

Members of the IMF’s executive board reviewed the role of surcharges, now the fund’s biggest source of income, late last year, without reaching a final decision, US News reports.

Doubts about the agreement with the IMF

The political disagreements within the Government around the announcement of understanding with the Monetary Fund to refinance Argentina’s debt with this international organization, spark new doubts and uncertainty among analysts.

Above all, what remains unclear to them is whether there will really be a consensus throughout the ruling party to approve an agreement with the IMF in Congress, and what its viability is for when the internal electoral struggle who will seek re-election next year.

At the same time, mixed messages involving the tour of the President of the Nation through Russia and China, in the midst of negotiations with the United States and the Monetary Fund, add more noise to this confusing climate.

These challenges are highlighted in the latest report of the LCG consultantfounded by the economist Martín Lousteau.

It states that, barely a week after the announcement of an agreement with the IMF, “there are already more disagreements than points of understanding“.

In the first place, he mentions that the deal does not yet have concrete numbers, beyond the fact that a goal of accumulation of Bookingsa trail of fiscal deficit and one of monetary issue.

“Those 3 pillars look very weak as a plan, but even more so when each goal is deepened and differences begin to exist“, they warn from LCG.

And they detail: “Internally, it was said that there was not going to be a change in the tariff policy, but, at the same time, the IMF was in charge of rushing a tweet from G. Gopinath commenting that it had been agreed to gradually reduce them.”

On reserve accumulation goal for US$5,000 million, It is noted that it is not yet clear whether the IMF would disburse an extra in line with the payments made by Argentina during the pandemic, a fact that would allow fulfill “partially” with that goal.

“Nor is it known if that extra corresponds to the totality of the payments or only to the portion of capital that was paid and not to the interests”, is another of the questions that the LCG economists ask themselves.

In turn, they add that “there is no agreement” when will those be disbursements.

Because, experts conclude that “one clear goal” seems to be the monetaryand it is the one that shines “more challenging”.

“Then there are the disagreements within the ruling coalition. The resignation of Máximo Kirchner as president of the bloc does precisely the opposite of what the IMF requested when it criticized the previous program. That is to say, he does not make the program ‘his own'”, the analysts point out.

To complete that “not even the ruling party as a whole adopts it”, and that takes away any “credibility fee” to goals.

“In that aspect, it’s difficult to convince the opposition to vote for an agreement that does not have the conviction of the force that sends it”, they conclude from LCG.

In short, they believe thatwithdraw from the agreement Before making it known to the public, he already gives a “sample of political fragility” to carry out any program.

“Maybe, Where this is most striking is in the government group that carried out the negotiation. There they seem to look for problems where there were none”they sentence from this economic consultancy.

political fragility

In this regard, they state that it was “inopportune” the president’s trip Alberto Fernández and his entourage to Russia, in the midst of tension with the United States due to the conflict in Ukraine.

At the same time, consider “most inopportune” by the Government to have pronounced a “anti-Washington” speech to “please a brief Russian public or gain the sympathy of a President who set aside just 10 minutes for the meeting alone between the two leaders”.

“The difficulties of the agreement between the negotiating team and the IMF were obvious, and the solution of speeding up an understanding in the midst of an imminent crisis is understandable”, say the LCG experts.

And they add: “The disagreements into the government they were unexpected that they come to light so quickly and shine, at least, inopportune. Now, add noise in the plane of the international relations of the country, was unnecessary“.

In this sense, they affirm that the problem is not only “rhetoric, but that declarations in Moscow or Beijing can really change the mood of the IMF’s main shareholder.”

Experts also consider that the “political weakness” of the ruling party can result in a “lower confidence” Who gives the credit?

“These rudeness in a few weeks can remain an anecdote and be attributed to certain outbursts, whether by the President on the international tour or by the former President of the bloc of ruling deputies. What does begin to crystallize is again the lack of ideas and determination. Either the agreement with the IMF is embraced or it is rejected”, they reflect from LCG.

And they end: “Half-measures make us lose more illusion in the capacity and willingness of the Government to comply with the program with the IMF, which is not written yet. That credibility gap cannot be imported from Russia, China or the United States.”

In your opinion, credibility is built with discipline, conviction and persuasion to society that it is the “right path”.

For this reason, from LCG they maintain that today, with many disagreements and hardly an understanding with the IMF, the only doubts that are dispelled are that the “officialism is still fragmented inside, and that the economy is seriously fragile. On the verge of having to announce a program that has not yet been agreed upon, neither internally nor with the IMF.”