Washington, DC: The Executive Board of the International Monetary Fund (IMF) approved a 30-month extended arrangement under the Extended Fund Facility (EFF) for Argentina amounting to SDR 31.914 billion (equivalent to US$44 billion, or 1000 percent of quota) and concluded the 2022 Article IV Consultation.
The Executive Board’s decision allows the authorities an immediate disbursement of SDR 7.0 billion, equivalent to US$9.656 billion. The EFF arrangement aims to provide Argentina with balance of payments and budget support that is backed by measures designed to strengthen debt sustainability, tackle high inflation, boost reserves, address the country’s social and infrastructure gaps and promote inclusive growth.
The authorities’ IMF-supported programme, which was recently approved by the Argentine National Congress, aims to strengthen public finances and start reducing persistently high inflation through a multi-pronged strategy involving a gradual elimination of monetary financing of the fiscal deficit and an enhanced monetary and exchange rate policy framework. The program also envisages steps to strengthen the domestic peso debt market, the effectiveness of government spending, labor and gender inclusion, and the competitiveness of key sectors.
Following the Executive Board discussion, Managing Director and Chair Kristalina Georgieva made the following statement:
“While an economic and employment recovery is underway, Argentina continues to face exceptional economic and social challenges, including depressed per capita income, elevated poverty levels, persistent high inflation, a heavy debt burden, and low external buffers. Against this backdrop, the authorities’ economic program sets pragmatic and realistic objectives, along with credible policies to strengthen macroeconomic stability and begin to address Argentina’s deep-seated challenges. Important financial commitments secured from Argentina’s international partners will support the authorities’ reform efforts and improve the country’s external buffers. Strong political and social consensus is key to sustain the implementation of the reform agenda, including over the medium term, which is essential to address the country’s long-standing vulnerabilities.
“The programme contains a carefully calibrated set of economic policies. A sustained and growth-friendly fiscal consolidation will strengthen debt sustainability and allow for the elimination of the monetary financing of the fiscal deficit, which will help to start tackling persistent and high inflation. In addition, an enhanced monetary and exchange rate framework delivering positive real interest rates and a competitive real exchange rate will help support the demand for peso assets and improve reserve coverage. These actions will help pave the way for an eventual, conditions-based, easing of foreign exchange controls.
“Importantly, the programme includes policies to strengthen the domestic peso debt market, enhance the effectiveness and transparency of Government spending, promote labour and gender inclusion, and improve the sustainability and efficiency of key sectors.
“Risks to the program are exceptionally high and spillovers from the war in Ukraine are already materializing. In this context, early programme recalibration, including the identification and adoption of appropriate measures, as needed, will be critical to achieve the program’s objectives.” (www.imf.org)
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