After four years of Argentine claims, the FMI granted a reduction in the rates and surcharges that charges the most indebted countries. The measure will not only benefit Argentina, but also other nations such as Ukraine o Pakistan. The Government celebrated it as a triumph before the eventual renegotiation of the current program, but the history of this decrease dates back to the pandemic.
The IMF’s decision implies a 36% reduction in costs of financing for middle-income countries, which is equivalent to about US$1.2 billion per year. “The number of countries that are expected to be subject to surcharges in fiscal year 2026 will decrease from 20 to 13,” said the agency’s managing director, Kristalina Georgieva.
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The Ministry of Economy explained that the change means a saving for Argentina of approximately US$3.2 billiondue to the 29.1% reduction in the payment of charges and surcharges for the entire current loan. “The savings will be felt especially during the next 3 fiscal years where the reduction will be approximately US$1.1 billion,” the Government highlighted.
He initial proposal of Argentina for the overcharges had been in 2020 and was taken back by the current government. At the end of July, during the G20 summit, Minister Luis Caputo asked for progress in discussions on the issue and highlighted the importance of generating a relief on the financial burden of the countries that are affected by these additional interests.
Once the news was spread, the head of the Treasury Palace expressed himself on his X account. There, he thanked Georgieva and said: “It is very important for countries like ourswhose people are doing a great effort to get ahead”.
The minister Federico Sturzenegger joined the celebration and assured that the IMF’s decision “was only possible because in Argentina Today there is a Government committed to fulfilling its commitments who is worth helping. With the defaulters “It would have always been impossible.”
In response to the query of TN, Hector Torresformer Argentine representative to the IMF, stated: “The reduction of IMF surcharges is an achievement that shows that there is interests nationals that we have to defend, although the color of the governments changes“, said.
And he added: “It is important to remember that overcharges feed the IMF’s ‘precautionary’ balance sheet. That is, an account that ensures that the IMF can continue operating normally, even if one of its debtors defaults. Argentina is, by far, the IMF’s main debtor. Therefore, we are your biggest contingent risk. Therefore, although the initial kick was given by Martín Guzmán, it was only possible to ‘score the goal’ with a Government which is absolutely determined to honor all commitments external.”
How the negotiation of Javier Milei’s government with the IMF continues
Despite the financial relief that the reduction in surcharges will represent, lArgentina will have to continue making capital and interest payments to the IMF until 2044 for the loan granted in 2018 and refinanced in 2022. One possibility to achieve an extra improvement would be for the Government renegotiation with the organism. However, both the authorities of the Fund and the Ministry of Economy denied being in talks to close a new agreement.
For now, Argentina must complete the last two audits pending the current program, which could be carried out together. The organization’s technicians will have to evaluate the numbers as of June 30 and September 30. In the case of the meta fiscalthe consensus is that it was fulfilled in both periods. On the other hand, the reserve accumulation objective was not achieved in the third quarter, so the Government will require a waiver (sorry) from the IMF.
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In about 10 days, Caputo will travel to WashingtonUnited States, to participate in the annual meetings of the IMF and the World Bank, which will take place from October 21 to 26. He will be accompanied by the Vice Minister of Economy, Jose Luis Dazaand the Secretary of Finance, Pablo Quirno.
Although the agenda is not yet defined, it is likely that Argentine officials will look for some space to meet with IMF representatives and expedite the negotiation to finish the reviews and begin discussing a new refinancing.
a long road
The claim for overcharges started in 2020when Martin Guzman He was still at the head of the Ministry of Economy and was seeking to renegotiate the agreement with the IMF signed in 2018, something that only happened at the beginning of 2022.
The former head of the Treasury Palace used the G20 meetings and G24 to put on the international agenda the idea that the surcharges charged by the IMF – once designed to discourage excessive indebtedness – today ended deepening the crises of the countries at the time when they most needed financing.
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The Nobel Prize winner in Economics and Guzmán’s mentor at Columbia University, Joseph Stiglitzjoined the crusade and expressed on several occasions the need to review the IMF’s surcharge policy. Added to this was a letter signed by four former Argentine economy ministers: Axel Kicillof, Martin Losteau, Jorge Remes Lenicov and Guzmán himself.
“It was a 4-year global crusade. Since our initial proposal at the G-20 in Saudi Arabia in 2020, support from the G-20, legislators from the United States Congresslas United Nationshe Vaticanmany academic and civil society institutions,” Guzmán wrote on his X account, after hearing the news.
And he added: “Worked without pause politically and technically to reform an absurd and especially harmful policy for Argentina due to the enormous amount of debt with the IMF taken on in 2018-2019. THANK YOU to all the world figures and our country who worked for some relief to countries in crisis.”
During the mandate of Alberto Fernandezthe IMF discussed the surcharges on several occasions, but there was no agreement among shareholders to make the changes that will finally be implemented from next month.