How do Colombia and Argentina compare with respect to debts to the IMF?

Recently, the President Gustavo Petro spoke of asking the International Monetary Fund longer period to pay the use of the flexible line of credit than Colombia used by the global crisis of the covid-19 pandemic. As a result, comparisons were generated with the process that Argentina with said organization to be able to fulfill your debt in the midst of your financial difficulties

The head of state stated that “I am going to talk to the president (the position is managing director) of the International Monetary Fund to exchange that short-term debt for the same debt because it must be paid. We pay, but in the long term, in such a way that a greater financing space can be opened than the one we have for the social spending of the Colombian people.“.

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Afterwards, the Minister of Finance and Public Credit, Ricardo Bonillasaid that for the Government there is a dilemma as to whether it continues to pay debts within the terms of current contracts or make the necessary investments to reactivate the economy.

The IMF loan that the president is talking about is the so-called flexible credit line, which works like a credit card, it is a quota available to countries that have accessed this mechanism. Colombia had had the possibility of that quota that it did not use for years, but given the recession of the global economy in 2020, it decided to receive resources in order to financially help the emergency programs that arose when the economy, families, workers and companies They had to remain locked up.

This line of credit created by the IMF, unlike the other loans of that entity, does not require accompanying programs or policy commitments from the countriessince it was offered to economies like Colombia, which already had conditions for healthy management of their finances.

Unlike Petro's statement that “this was the only country in the world that made that loan,” among the few that met the conditions for the flexible line, these nations were also accessed as Mexico and Poland.

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While the president says that “they are drowning us“, he former Minister of Finance, José Manuel Restreposays that line of credit “recognizes the good macroeconomic management of the country and has used less than 50% and is very cheap, because it is 1% annually, since today it can be seven or eight times more expensive“.

Kristalina Georgieva, director of the International Monetary Fund (IMF).

Bloomberg

Under that logic, he also former Minister of Finance, José Antonio Ocampowarns that “The IMF will not renegotiate the payment schedule of an agreed program without demanding anything in return“.

For Ocampo, renegotiating would be a mistake, since modifying current conditions for a long-term line “It would have conditionality (like Argentina's), it would be more costly and it would signal that the country's history of macroeconomic strength is being lost.“.

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But the truth is that this week, in the middle of the joint annual meetings of the IMF and the World BankThe director of the Western Hemisphere Department of the IMF, Rodrigo Valdés, assured in a press conference that the Colombian Government already has “programmed into your budget“payments to the entity for this year and the next.

“There are no discussions about any other payment plan,” the economist said of the situation.

Argentina

PHOTO: iStock

The comparison with Argentina has an origin and that is that, in the recent past, This Latin American country is the one that has had to submit to the IMF conditions to refinance its debt.

By renegotiating its debt with the Fund, Argentina has had to undergo a program in which it must meet goals related to the fiscal deficit, international reserves, among other parameters. For this year, for example, the commitment is to obtain a fiscal surplus of 2% of GDP, for international reserves to reach 10 billion dollars and for the central bank to stop issuing money to deliver it to the Government, conduct that is at the base of the hyperinflation suffered by Argentina.

These parameters allow a comparison with economic unemployment in Colombia. For example, while Argentina seeks to ensure that reserves reach 10 billion dollarsin Colombia these are from 60 billion dollars.

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Regarding economic growth, Argentine production in 2023 was 1.8% lower than it was 10 years ago, while Colombia's was 32.5%.

Javier Milei

EFE

Meanwhile, inflation in Colombia, which in recent times has become one of the highest in Latin America, is at 7.36%, a level to which the country was no longer accustomed. Even so, it is far from the 288% annual rate in Argentina.

For now, it is expected that the rating agencies are adding new information for their notes to the country and the corresponding perspectives they assign to the debt.

WEATHER – ECONOMY