Home Argentina Morgan Stanley Says Argentina-IMF Agreement is ‘Within Reach’, But Now Seen Only by Early 2Q

Morgan Stanley Says Argentina-IMF Agreement is ‘Within Reach’, But Now Seen Only by Early 2Q

Morgan Stanley Says Argentina-IMF Agreement is ‘Within Reach’, But Now Seen Only by Early 2Q
Argentina's Casa Rosada. Courtesy of Pixabay.com

NEW YORK– Argentina and the International Monetary Fund  are yet to find a consensus on the basis of an assistance program, and the longer the delays deeper the consequences for the South American nation, according to Morgan Stanley.

“Timing is an issue, Argentina’s resources continue to dwindle, and the negotiations cannot be extended for too long, in our view,” a group of five analysts wrote in a report to investors dated January 12. “Seeing a program approved by the IMF board and Argentina’s Congress in 1Q22 seems highly unlikely; considering the limited resources and the repayment schedule, Argentina could enter arrears by March 21-22,” they said in the 29-page study.

While government officials and the multilateral lender have made public comments acknowledging progress in the talks, both sides are still separated by the path of fiscal policy, the report said. “So, there seem to be fundamental disagreements over the tools to achieve fiscal objectives and the pace of consolidation itself,” the analysts  Fernando SedanoSimon Waever, Guilherme Paiva, Juan P. Ayala and Teo C. Lotito wrote in the note.

“Argentina’s proposal for a growth-driven fiscal gradualism that translates into a primary balance in 2027 is seemingly off the table for the IMF. We think a primary deficit of roughly 1.5% of GDP in 2023 is a likely path,” they said in the report.

Morgan Stanley report Argentina Economics & Strategy, January 12, 2022.

Despite the differences, Morgan Stanley maintains the view that a deal will be reached. “In our opinion, the wide gap in views and the seeming lack of substantial progress should not be seen as a deal-breaker and negotiations should continue.”


Argentina faces repayments to the IMF for USD1.1 billion this month and February, according to the report, and another USD2.8 billion on March 21 and 22. The nation’s the international reserves stood at USD650 million in December, “which means that already in February Argentina will have to decide whether to use broader FX reserves to make payments to the IMF,” the report said. “If those repayments are not made, Argentina would enter into arrears, which we suspect may not be a problem as long as the period of arrears is expected to be very short with clear signs that negotiations remain in good faith and progress is being achieved.”

Morgan Stanley report Argentina Economics & Strategy, January 12, 2022.

Since at least September of last year the New York City-based investment bank has projected that Argentina and the IMF will be able to narrow their differences and enter into an Extended Fund Facility (EFF) program, avoiding an “autarky scenario” in which the government opts to avoid an IMF program and the eventual FX and fiscal adjustments needed. 

“We think the willingness of both parties to agree should translate into more intense negotiations in the coming days and weeks, otherwise risks of a disorderly macro adjustment could rise fast,” the analyst said.

Argentina has defaulted nine times on its sovereign debt and owes USD18.8 billion to the IMF in 2022. The nation’s economy contracted 9.9% last year, and in its most recent regional economic outlook the IMF projects a 7.5% recovery for 2021 continued by a 2.5% expansion this year. A new agreement with the IMF will replace a failed USD57 billion three-year stand-by program approved on June 2018 and signed by the administration of former President Mauricio Macri. The South American nation owes USD45 billion to the fund.

Also Relevant:
* Argentina’s Strategy Toward IMF Deal Hits a Wall of Doubt: Reuters
* BofA Says For Argentina It’s ‘Time for Action’, Sees IMF Staff-Level Agreement by January
* BofA Sees Argentina Reaching IMF ‘Staff-Level’ Accord in January, a Finalized Deal By March
* Goldman Sachs Says Argentina Midterm Results May Complicate IMF Talks, Precipitate a Large Devaluation
* Former IMF’s Werner Says Argentina Will Not Pay The Fund: Reuters
* Morgan Stanley Says Argentina Likely to Sign a ‘Soft’ IMF Program by 2Q 2022

To contact journalist of this story:
Email: jearrioja@zignox.com


Please enter your comment!
Please enter your name here