In her public epistolary expression in the days before the Government decided to avoid default with the IMF, Vice President Cristina Fernández de Kirchner complained that throughout last year Argentina paid USD 5.16 billion to the Monetary Fund in capital and debt interest.
Late on Thursday, IMF Managing Director, Kristalina Georgieva, complained about the high fiscal cost of energy subsidies, which she described as “generous” and placed them at the center of the claims to advance in the definitive agreement. Although the sayings of one and the other were not a direct exchange between them, the truth is that the figures speak for themselves and explain, beyond the macroeconomic distortions, the Fund’s inflexibility with the rate adjustment.
The figures speak for themselves and explain, beyond the macroeconomic distortions, the Fund’s inflexibility with the rate adjustment
This because the Government allocated USD 11,000 million to subsidize energy prices throughout 2021, more than double what was allocated to cancel the maturities agreed with the IMF according to the payment schedule still in force. The figure represents an increase of 137% compared to the previous year and can only continue to grow unless the increase in rates is greater than the 20% average that the Energy Secretariat insists on.
In this sense, as reported Infobae, if the rates recorded an increase of twice what the Government admits so far, that is, a 40% rise, the amount destined to subsidize users’ bills would barely be reduced to USD 10,500 million. If, on the other hand, the 20% increase were confirmed, the necessary spending would rise at least 10% and would compromise the 2.5% fiscal guideline agreed upon up to now.
In any case, These figures are equivalent to more than half of the maturities that the Government seeks to refinance in 2022, given the high concentration in the short term. Without a definitive agreement, The Government should cancel some USD 19,000 million this year to promptly honor the debt that expires only with the IMF. Obligations with other multilateral organizations and the Paris Club are not computed in this account.
If the 20% increase in the electricity rate is confirmed, the necessary spending would rise at least 10% and would compromise the fiscal guideline of 2.5% agreed upon so far with the IMF
But not only in fiscal terms, the rate delay represents a problem. also for the Central Bank, the growing need for dollars to import energy became, last winter, a cause for concern. Throughout the year, USD 5,800 million escaped through this channel.
With these numbers in the picture, it is not surprising that the Monetary Fund considers the increase in rates a condition sine qua non for the new deal.
However, there are no concrete definitions. By case, The Undersecretary of Electric Power published a report during the week in which it admits that users pay with the current rate only 35% of the cost of electricity, 31 points less than two years ago.
For its part, the ENRE, directed Frederic Basualdo, the official that the Minister of Economy, Martín Guzmán, wanted to fire in April of last year, presented on Friday a proposal to segment rates based on location and real estate value to withdraw subsidies to some 487,000 users. In principle, it would not be the definitive segmentation. It is that beyond the complexity of the implementation – Cristina Fernández de Kirchner herself tried a similar idea in 2011 – the segmentation could be legally debatable.