Uruguay's new finance minister Danilo Astori yesterday expressed confidence that his team will wrap up negotiations with the IMF on a new programme next week. This would then pave the way for the signing of an agreement, following a board vote expected within a month.
In an exclusive interview with Emerging Markets, Astori said his government has "already advanced a lot" towards the agreement through discussions with the Fund last week in Montevideo. He expects further substantive movement towards a final deal during the IMF's spring meetings in Washington.
"The second part of the discussion, which will be held next week with the IMF, refers to fiscal results and conditions to access IMF funds," he said. Astori also revealed that the agreement with the Fund will include a primary fiscal surplus target – a key condition of a Fund programme – of 3 .5% of GDP this year.
The finance minister reaffirmed his government's commitment to sound macroeconomic policies and fiscal restraint. His comments will reassure the market, which is eager to hear more about the priorities of the government that swept to power last month, partly on the strength of leftist credentials. Investors will want to know more about its commitment to implement vital social schemes and combat poverty.
Uruguay has been urging the IMF to allow for more flexibility in making debt payments to the Fund, a concession that Astori believes is forthcoming. "We need a definition that is coherent with the needs of Uruguay and I'm sure we'll get that," he said. "We already have some good agreements with the IDB and World Bank, and those will make things easier with the IMF." Astori said that more flexibility would allow the country to reduce its debt "while taking into consideration internal needs".
Astori pointed to Brazil and Chile, which he believes are the "benchmarks" for Uruguay's economic growth.
Uruguay's goal is to emulate Brazil's success by eventually graduating from the Fund. "We're now trying to reach an agreement with the IMF so that we won't need the Fund in the future. This is what Brazil has done and what the IMF would also like us to do," he said.
Analysts expect Uruguay's strong recovery to continue this year. Economic growth should reach 6% and the fiscal deficit should fall to about 2% of GDP. The debt burden, however, remains high.
Astori acknowledges that reducing it is his biggest challenge. "I believe we have to reduce the ratio of debt to GDP but we've got to achieve that with sustainable growth. That's why we do need to improve dramatically our productive capacities to attract FDI because we know that's the only way to achieve the main objective of any leftist government: to improve peoples' quality of life."