Argentina: IMF debated interest rate revision

The managing director of the International Monetary Fund (IMF), Kristalina Georgieva, emphasized that Argentina requested the revision of the interest rates that the institution regularly charges among its members and affirmed that Argentina "reviews interest rates while the IMF will carry out periodic revision of the commissions charged ". Likewise, he argued that it is the right time to discuss these issues and they seek a method of general consensus to proceed in a meaningful way in the evaluation.

Argentina and the IMF are in slow negotiations to establish new terms to pay off the huge loan of more than 57 billion dollars to the country in 2018, of which Buenos Aires received 44 billion dollars.

The intention of the Alberto Fernández government is to be able to postpone the negotiations, or extend them until next year. Why? It is believed that he needs to buy time. When they sit down to negotiate, the current administration wants to start with an advantage in congress. However, several groups of Argentine debt lenders are skeptical of this proposition and demand prompt negotiations.

The Minister of Economy, Martín Guzmán, supported a proposal within the framework of the G-24 that aims to "review the access restrictions and the policies of surcharge of interest rates of the IMF loan program", while checking the policies in the current pandemic context, surcharges should be suspended immediately to help developing countries. However, the legislative elections in October in Argentina may affect the timing of negotiations.

“I want to celebrate the position of the G-24 by emphasizing the urgent need for a revision of the Policy on Access Limits and Interest Rate Surcharges in IMF loan programs, which is a regressive and pro-cyclical policy that disproportionally affects countries that are in more adverse circumstances and that are not aligned with the mission of improving world financial stability, ”said Guzmán; Thus, how does this decision affect developing countries that need liquidity?

To this end, the IMF's governing authorities came to the conclusion of voluntarily reallocating unused Special Drawing Rights (SDRs) to benefit the situation of developing countries, including emerging and immediate-income economies.

Steps to follow after the interest rate review

Ensuring equitable access to vaccines is a great first step. From the perspective of both humanitarian and economic consequences, advanced and developing countries experience inequalities in access to vaccines and if the post-pandemic situation does not change, the world will be more "naked" in terms of economic, social and political inequality.

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The IMF should continue to work to build a better margin in which there are, equitably, more global public goods to protect existing public goods in a way that leads to greater economic and financial stability, as well as a model of more sustainable production that protects the environment. The G-24 is the main forum for coordinating economic and financial policies in emerging and developing economies. In the context of the pandemic, the G-24 aims to achieve an effective outcome.

The Monetary Fund body seems to be constructively committed to the country and it is for this reason that it chose to reduce the interest burden on its loans.