## 1argea2025002-print-pdf ## Source details **Canonical URL:** [1argea2025002-print-pdf](https://www.imf.org/-/media/files/publications/cr/2025/english/1argea2025002-print-pdf.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2025/english/1argea2025002-print-pdf.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2025/english/1argea2025002-print-pdf.pdf.json) --- ### Executive summary — context, outcomes, vulnerabilities - Policy package: stabilization plan centered on a strong fiscal anchor, an initial large step devaluation (followed by a crawling peg), and a deregulatory agenda. - Outcomes achieved to date: - Rapid disinflation; first primary surplus in almost two decades; initial turnaround in reserves; strengthened central bank balance sheet; sharply lower sovereign spreads. - Economic recovery since mid-2024 with improvements in real wages and social indicators. - Remaining vulnerabilities: - Net international reserves (NIR) remain extremely low; gross international reserve coverage weak. - Inflation remains elevated with concerns about the quality of the central bank’s assets. - Structural impediments: inefficient and complex tax system, relatively closed economy, limited labor and product market flexibility. - Social fragility: about 38 percent of the population living in poverty; elevated informality. ### Program objectives and key policy pillars - Purpose: address Argentina’s weak balance of payments, maintain external and internal stability, and create conditions for stronger, sustainable growth. - Core objectives: - Maintain a strong fiscal anchor and improve durability/quality of underpinning policies. - Transition toward exchange rate flexibility while gradually lifting FX restrictions. - Continue supply-side reforms to boost productivity, competitiveness and governance. - Key policy features: - Fiscal: primary surplus rising from about 1¼ percent of GDP this year to around 2½ percent of GDP over the medium term. - Financing: extend maturities, replace FX- and inflation-linked securities with fixed-rate instruments; early reserve buildup to narrow sovereign spreads and facilitate re-access to markets by early 2026. - FX/monetary: float exchange rate within a wide band initially; FX purchases within band consistent with reserve goals; replace broad monetary base ceiling with conventional monetary aggregate framework and strict limits on BCRA net domestic assets; evolve toward fully flexible exchange rate in a bi-monetary system (peso and U.S. dollar coexist). - Structural: implement Ley Bases and new regime to encourage large investments; increase product and labor market flexibility; lower state footprint; improve governance (procurement, anti-corruption, AML/CFT alignment). ### Macro baseline and projections - Real GDP growth: - Expected to expand by about 5½ percent in 2025. - Expected to converge to about 3 percent over the medium term. - Inflation: - Expected to fall to around 18–23 percent by end-2025. - Expected to reach single digits by 2027. - External current account: - Shift from a surplus of 1 percent of GDP to a slight deficit in 2025; medium term broadly balanced with improved reserve coverage, reaching 100 percent of the ARA metric by 2030. ### Selected recent macro statistics - Output and labor: - After a three-quarter recession with activity dropping by almost 6 percent, real GDP rebounded in H2:2024. - Q3:2024 growth about 4 percent q/q; Q4:2024 growth 1.3 percent q/q. - Real wages up 10 percent between June and December. - Inflation trajectory: - Monthly headline inflation fell from 25.5 percent in December 2023 (211 percent y/y) to 2.4 percent in February 2025 (67 percent y/y). - Goods and wholesale inflation trending below 2 percent m/m. - Social: - Poverty declined from 53 percent in H1:2024 to 38.1 percent by end-2024; extreme poverty fell to 8.2 percent. ### Social conditions, fiscal outcomes, and safety nets - Drivers of poverty improvement: disinflation, sharp pickup in real wages, V-shaped recovery, scaled-up social assistance (benefits for mothers and children doubled in real terms), pension indexation reform. - Fiscal discipline and financing: - Cash primary surplus about 1.8 percent of GDP in 2024 (turnaround from nearly -3 percent of GDP in 2023). - Primary spending contraction down 30 percent y/y in 2024. - Cumulative primary surplus about 0.5 percent of GDP through February 2025. - Treasury covered FX obligations due in January (US$4.3 billion) and has a balance available for obligations due in July (US$4.3 billion). - Social assistance: - AUH and Alimentar benefits nearly doubled in real terms since November 2023; assistance now covers about 100 percent of the basic food basket (previously 55 percent). - Expanded coverage in September 2024 to 500,000 more children up to age 17. ### Monetary, FX, and reserve dynamics - Monetary policy and BCRA actions: - Policy rate reduced from 117 percent (end-2023) to 29 percent currently; rates shifted to positive real ex ante terms as inflation and expectations declined. - Cap on “broad” base money around ARS 48 trillion; interest rate corridor (Lefi) and active repo window operational. - Private peso demand recovered; rapid expansion of peso-denominated credit. - Trade and reserves: - Goods trade: deficit of around US$4 billion in 2023 shifted to cumulative surplus of US$15 billion through December 2024. - Import volumes -15 percent y/y; export volumes +28 percent y/y. - Energy balance improvement over US$5 billion relative to 2023; energy exports up 29 percent y/y (volume); energy imports -45 percent y/y (volume). - Gross private financial inflows in 2024 driven by tax amnesty repatriations (~US$9 billion); corporate bond issuances US$0.5 billion; trade financing increase ~US$3 billion (reversed since H1:2024). - Offsetting outflows: bondholder debt service ~US$10 billion; net debt payments to official creditors US$3.5 billion; discretionary FX parallel market interventions US$1 billion. - NIR rose by around US$6 billion during 2024 but declined by US$4.0 billion through end-March 2025; NIR currently stands at negative US$6.4 billion (about 20 percent of the ARA metric). ### Debt, DSA, and financing strategy - Debt management and projections: - Net public debt projected to decline from about 52 percent of GDP at end-2024 to around 31 percent of GDP by end-2030 (conditional on implementation). - Gross financing needs over the medium term average 8 percent of GDP (excluding intra-government debt service). - Baseline assumes re-access to markets by early 2026; initial spreads assumed between 400–500 bps in projections. - Domestic debt strategy: - Reduce rollover risks by extending maturities and shifting away from inflation- and FX-linked securities. - LeFi instrument: nominal ARS$20 trillion issued July 2024 (3.5 percent of GDP). - External financing: - Official financing: World Bank and IADB projected to provide US$2 billion net financing in 2025. - PBOC swap: drawn portion US$5 billion falling due starting mid-2025 with refinancing assurances reported. ### Proposed EFF arrangement — access, phasing, and use - Authorities requested a 48-month EFF with access equivalent to SDR 15.267 billion (about US$20 billion; 479 percent of quota). - Phasing and disbursements: - Upfront 60 percent of access: SDR 9.160 billion (US$12 billion) upon approval. - First review (June 2025): SDR 1.529 billion (US$2 billion). - Second review (late-2025): SDR 0.763 billion (US$1 billion). - Semiannual reviews 2026–29: SDR 0.545 billion (about US$0.7 billion) each for seven reviews. - Intended use: budget support; disbursements used to buy back Letras Intransferibles from BCRA to strengthen BCRA balance sheet and rebuild reserves. - Exceptional access: program subject to exceptional access policy (359 percent of quota in first twelve months; Fund credit already 976 percent of quota). ### Program conditionality, monitoring, and safeguards - Monitoring toolkit: quantitative performance criteria (QPCs), indicative targets (ITs), structural benchmarks (SBs). - QPCs include cumulative floor on federal government primary balance; cumulative floor on change in NIR; cumulative ceiling on BCRA financing of federal government; ceiling on federal government stock of domestic arrears; continuous QPC on non-accumulation of external payments arrears. - Indicative targets: ceiling on change in BCRA net domestic assets; floor on coverage of social assistance programs. - Prior actions required: BCRA press release clarifying new monetary/FX regime; BCRA resolutions easing current account and capital account restrictions; DNU eliminating export incentive scheme (80/20). - Safeguards: updated safeguards assessment by first program review; strengthen BCRA balance sheet and autonomy; ensure IFRS adherence; enhance IT security and cybersecurity. ### Monetary and FX reform details and targets - Strategic shift: - Transition to a flexible exchange rate within a band with private M2 (net of remunerated deposits) as intermediate target and strict limits on net domestic assets. - Pathway to fully flexible exchange rate in a bi-monetary system. - Key actions and targets: - Exchange rate float within sufficiently wide band; FX purchases within band consistent with reserve accumulation goals. - NIR (net of Fund disbursements) set to increase by at least US$4 billion this year (performance criterion). - Abandon ARS 47.7 trillion broad monetary base ceiling; monitor private M2; establish strict NDA limits (indicative). - Eliminate many remaining current account restrictions gradually; retain 30 percent withholding taxes on outbound tourism and FX credit card purchases; remove US$200/month household USD purchase cap. ### External financing gap and medium-term scenarios - External Gross Financing Needs (US$ billions; accrual basis) — Average 2026-30 (table ranges preserved): - A. Financing needs (1+2-3): -47.0-50.0 - 1. Public sector: -13.6-21.1 - FX bondholders and BOPREAL: -6.0-6.4 - IMF: -3.1-8.9 - Other official: -4.5-5.7 - 2. Other 1/: -13.7-18.4 - Provinces: -1.2-0.7 - Private: -12.4-17.6 - 3. Gross reserve accumulation: 19.7-10.6 - B. Financing sources (1+2+3): 31.8-47.9 - 1. Current account credits 2/: 7.3-15.6 - 2. Private FX flows (incl. FDI) 3/: 17.8-27.4 - o/w: to public sector: 0.5-6.4 - 3. Other official: 6.7-5.0 - C. External financing gap (A+B): -15.2-2.1 - Notes explain components; 2025 column source: IMF staff estimates. ### Risks, contingency plans, and program design features - Main risks: - Downside: deterioration in external conditions (trade tensions, tighter global financial conditions, lower commodity prices), climate shocks, electoral volatility. - Domestic: fragile social conditions and implementation risks. - Enterprise risks: high given large exposure and program complexity. - Contingency plans: - Authorities prepared to tighten fiscal and monetary policies if shocks materialize. - Specific contingency actions: tighten liquidity (interest rates rising endogenously) consistent with strict NDA ceiling; fiscal tightening via expenditure cuts if revenues disappoint; save revenue overperformance or reduce distortive export taxes; adjust pace/sequencing of FX restriction easing. - Exceptional access assessment: - Staff judges all four EA criteria met (balance of payments pressures; medium-term debt sustainability; prospects for market access; prospect of program success and capacity to deliver), while cautioning EA assessments will require close consideration at reviews. ### Structural reforms, growth potential, and Box findings - Deregulatory agenda and market reforms since December 2023 and June 2024 Ley Bases: state modernization, reduction of entry barriers, competition improvements, labor market flexibility, SOE rationalization. - Box 5 (Potential Growth Impact): - Governance and business regulation reforms closer to EMs 75th percentile could boost output by over 1½ ppts per year over five years. - Reducing external restrictions to EMs 50th percentile could increase output by an additional 2¾ ppts per year over same period. - RIGI large investment scheme: attracted over US$12 billion in investment bids; investments totaling US$12.5 billion agreed or announced over the medium term (energy and mining). ### Energy and mining outlook - Energy balance: - Energy trade surplus almost US$6 billion in 2024 (US$5.5 billion). - Upstream investments in 2022–24 about US$30 billion at Vaca Muerta. - Near- and medium-term projections: - Energy balance set to improve by an additional US$3 billion in 2025. - Energy sector projected to generate a trade surplus of US$15–18 billion by 2030 and add about ½ percentage points in annual real GDP growth. - Upside: energy balance could reach as much as US$30 billion by 2030 under further expansion. - Mining: current exports US$0.7 billion; potential for a ten-fold increase; example project: US$2.5 billion lithium project by Rio Tinto. ### Debt consolidation, public debt projections, and DSA highlights - Public debt projections (percent of GDP, selected): - Actual 2024: 85.3 - 2025: 73.1 - 2026: 68.2 - 2030: 55.7 - 2035: 38.2 - DSA judgment: “sustainable, but not with high probability.” - Key DSA assumptions and figures: - Real GDP: contraction of about 1.7 percent in 2024; expected expansion by 5.5 percent in 2025; potential growth about 3 percent medium term. - Inflation (eop): 117.8 percent in 2024; projected 18–23 percent by end-2025; single digits by 2027. - Primary fiscal surplus: 1.3 percent of GDP in 2025; steady-state projected 2.5 percent of GDP. - Gross international reserves: recover from around 24 percent of the ARA metric at end-2024 to around 100 percent by 2030. - Key stock measures and risks: - Gross federal government debt over 150 percent of GDP in 2023; fell to 85 percent of GDP in 2024 due to valuation and fiscal adjustment. - Net consolidated public sector debt reached 52 percent of GDP at end-2024. - About 40 percent of peso debt has capitalized interest payments recorded below the line (estimated 1.6 percent of GDP in 2025). ### Program ownership, political economy, and implementation priorities - Strong ownership: Milei administration actions since December 2023 include fiscal consolidation, de-indexation and devaluation, deregulation measures, and use of vetoes/DNUs to protect fiscal anchor. - Implementation priorities: - Maintain fiscal anchor and disinflation momentum. - Clear communication and political consensus-building for tax, revenue sharing, pension, and labor reforms that require Congressional support. - Protect the vulnerable via targeted social assistance while sequencing reforms to limit dislocation. *Source: Extracted content from IMF document "1argea2025002-print-pdf" (provided).* ### EXECUTIVE SUMMARY ### EXECUTIVE SUMMARY ### Context and recent stabilization - Milei administration implemented a stabilization plan centered on a strong fiscal anchor, an initial large step devaluation (followed by a crawling peg), and a deregulatory agenda. - Outcomes achieved to date: - Rapid disinflation, first primary surplus in almost two decades, initial turnaround in reserves, strengthened central bank balance sheet, and sharply lower sovereign spreads. - Economic recovery since mid-2024 with improvements in real wages and social indicators. - Remaining vulnerabilities: - External buffers remain very weak; net international reserves (NIR) remain extremely low. - Inflation remains elevated and concerns persist about the quality of the central bank’s assets. - Structural impediments persist: inefficient and complex tax system, still relatively closed economy, limited flexibility in labor and product markets. - Social situation: about 38 percent of the population still living in poverty and elevated informality. ### Program objectives and key policy pillars - Purpose of requested EFF arrangement: address Argentina’s weak balance of payments position, maintain external and internal stability, and create conditions for stronger and more sustainable growth. - Core objectives: - Maintain a strong fiscal anchor and enhance the durability and quality of underpinning policies. - Transition toward exchange rate flexibility while gradually lifting FX restrictions. - Continue supply-side reforms to boost productivity, competitiveness and governance. - Key policy features: - Fiscal: sustain the authorities’ overall fiscal balance anchor; primary surplus rising from about 1¼ percent of GDP this year to around 2½ percent of GDP over the medium term, supported by spending discipline, efficiency measures, and well-sequenced reforms of the tax, revenue sharing, and pension systems. - Financing: reduce rollover risks on peso debt by extending maturities and gradually replacing FX- and inflation-linked securities with fixed-rate instruments; decisive implementation and early reserve buildup expected to narrow sovereign spreads and facilitate re-access to international capital markets by early 2026. - FX and monetary: immediate transition to more robust monetary and exchange rate frameworks; exchange rate to float within a sufficiently wide band initially, FX purchases within the band consistent with reserve accumulation goals; replace broad monetary base ceiling with a conventional monetary aggregate framework and strict limits to the BCRA’s net domestic assets; short-term monetary rates to play a more active role; framework to evolve toward a fully flexible exchange rate in the context of a bi-monetary system (peso and U.S. dollar coexist). - Structural: deepen reforms to create a more open and market-based economy, including implementation of Ley Bases and a new regime to encourage large investments; focus on increasing product and labor market flexibility, lowering the state footprint, and improving governance (procurement, anti-corruption, AML/CFT alignment). ### Macro baseline and projections - Real GDP growth: - Expected to expand by about 5½ percent this year. - Expected to converge to about 3 percent over the medium term. - Inflation: - Expected to fall to around 18–23 percent in end-2025. - Expected to reach single digits by 2027. - External current account: - Projected to shift from a surplus of 1 percent of GDP to a slight deficit this year due to less favorable terms of trade and cyclical domestic demand recovery. - Over the medium term, a broadly balanced external current account and improved reserve coverage are expected, supported by higher FDI and adherence to fiscal and monetary/FX frameworks. ### Recent macroeconomic developments (selected statistics) - Output and labor: - After a three-quarter recession with activity dropping by almost 6 percent, real GDP rebounded in H2:2024. - Q3:2024 growth about 4 percent q/q; Q4:2024 growth 1.3 percent q/q. - Real wages up 10 percent between June and December. - Inflation trajectory: - Monthly headline inflation fell from 25.5 percent in December 2023 (211 percent y/y) to 2.4 percent in February 2025 (67 percent y/y). - Goods and wholesale inflation trending below 2 percent m/m. - Social indicators: - Poverty remains about 38 percent of the population. ### Risks, contingency plans, and program design features - Risks: - Downside: deterioration in external conditions (trade tensions, tighter global financial conditions, lower commodity prices) could harm growth and external prospects. - Domestic: fragile social conditions and the upcoming electoral cycle could add volatility and challenge program implementation. - Enterprise risks remain elevated given Argentina’s large exposure and history of challenging programs. - Contingency plans: - Understandings reached on strong contingency plans to address shocks and help secure program objectives. - Program modalities and monitoring: - Authorities requested a 48-month EFF arrangement with access equivalent to SDR 15.267 billion (about US$ 20 billion, or 479 percent of quota). - 60 percent of access to be disbursed upon program approval. - First review in June and second review in late-2025 with disbursements of SDR 1.529 billion (US$ 2 billion) and SDR 0.763 billion (US$ 1 billion), respectively. - Program shifts to semi-annual reviews over 2026–29 with disbursements of about SDR 0.545 billion (US$ 0.7 billion) for each of the remaining seven reviews. - Additional financing: US$ 2 billion in budget support from the World Bank and IADB; program expected to catalyze additional official financing and capacity building. - Program monitored by quantitative performance criteria (QPCs), indicative targets (ITs), and structural benchmarks (SBs). - Exceptional access considerations: - Program subject to exceptional access policy because of high upfront access (359 percent of quota in the first twelve months) and large Fund credit outstanding to Argentina (currently 976 percent of quota). ### Staff assessment highlights - The new program builds on gains achieved and supports the transition toward a more robust FX and monetary framework while boosting reserves and catalyzing official financing. - Sustained policy implementation, greater exchange rate flexibility, and structural reform implementation are necessary to entrench disinflation, safeguard fiscal and external sustainability, and boost medium-term growth prospects. *Source: EXECUTIVE SUMMARY (1argea2025002-print-pdf)* ### 7. Social conditions have improved, though remain ### 7. Social conditions have improved, though remain ### Social conditions and poverty - Poverty peaked at 53 percent in H1:2024—the highest since 2003—and has decreased rapidly to 38 .1 percent by end-2024, with estimates pointing to further declines since. - Extreme poverty has fallen to 8.2 percent (from 18 percent) over the same period. - Drivers of improvement: success of the stabilization plan in entrenching rapid disinflation; a sharp pickup in real wages (the recession was associated with limited employment costs); a V-shaped economic recovery. - Policy and program actions: authorities scaled up social assistance spending (especially for mothers and children, which doubled in real terms) and reformed the complex pension indexation formula to protect the real value of pensions. - Remaining fragilities: poverty remains elevated (especially among children); more than half of the labor force works in the informal sector. ### Fiscal discipline and domestic financing - The government posted a cash primary surplus of about 1.8 percent of GDP in 2024, a turnaround from a deficit of nearly 3 percent of GDP in 2023 and above the fiscal target under the previous program. - The adjustment was driven mainly by a sharp contraction in primary spending (down 30 percent y/y), with deep cuts in subsidies, pensions, provincial transfers, and capital spending. - President Milei’s vetoes of non-budgeted congressional spending initiatives in higher education and pensions aided consolidation. - Spending priorities shifted toward important expansions in targeted social assistance and security spending. - Result consistent with an overall cash surplus (0.3 percent of GDP). - Commitment to the fiscal anchor continued into 2025, with the government posting a cumulative primary surplus of about 0.5 percent of GDP through February, driven by buoyant tax revenues on account of a strong cyclical recovery (up 9 percent y/y in real terms), which enabled an expansion in real primary spending (up 19 percent y/y), though from a low base. - Fiscal management enabled the Treasury to accumulate peso and FX deposits at the BCRA and cover FX obligations due to bondholders in January (US$4.3 billion), with a balance still available for obligations coming due in July (US$4.3 billion). ### Debt rollover, spreads, and liquidity operations - Voluntary debt exchanges extended the debt maturity profile and shifted composition away from inflation-indexed debt toward fixed-rate instruments. - Treasury surpluses and cash management allowed coverage of FX bond obligations; a central bank repo operation (US$1 billion) with international investment banks boosted near-term liquidity. - After peaking at over 2500 bps in November 2023, sovereign spreads now stand around 95 0 bps, rising more recently on account of external and domestic uncertainties. - Note on cash interest payments: authorities reported cash interest payments of 1.5 percent of GDP; below-the-line interest payments worth about 2.5 percent of GDP are excluded from the cash interest bill but recorded in current debt stock. ### Monetary and FX policies supporting disinflation - Sustained fiscal surpluses allowed elimination of central bank financing of the government. - Exchange rate anchor: a monthly crawl rate of 2 percent, reduced to 1 percent in February 2025. - BCRA actions: cap on “broad” base money (set at around ARS 48 trillion), implementation of an interest rate corridor (monetary policy reverse repo or Lefi) and an active repo window to provide bank liquidity. - Monetary policy: policy rate reduced from an annual nominal rate of 117 percent in end-2023 to 29 percent currently. Monetary policy rates have shifted to positive in real ex ante terms as inflation and expectations declined. - The BCRA replaced peso-remunerated securities with Treasury liabilities and closed most BCRA put options. - Resulting behavior: private peso demand recovered sharply; money base growth largely offset by issuance of BOPREAL instruments and rising bank holdings of short-term Treasuries (LeFis); rapid expansion of peso-denominated credit. ### Trade, reserves, and external flows - Trade balance: goods trade shifted from a deficit of around US$4 billion in 2023 to a cumulative surplus of US$15 billion through December 2024. - Trade volumes: import volume compression -15 percent y/y; export volume expansion 28 percent y/y (agricultural export rebound after drought). - Energy balance: structural improvement up over US$5 billion relative to 2023—energy exports up 29 percent y/y (volume) and energy imports contracted -45 percent y/y (volume). - Moderation since H1:2024: surpluses moderated due to recovery in domestic demand, a more appreciated currency in real terms, and easing of distortive current account restrictions, including elimination of the FX access tax (impuesto pais) by end-2024. Trends continued into Q1:2025 with further import expansion and tourism outflows reaching highest levels since 2018. - Reserve dynamics: gross private financial flows rose in 2024 driven by resident asset repatriation following the tax amnesty on undeclared FX assets amounting to about US$9 billion; corporate bond net issuances (US$0.5 billion); some increase in trade financing (about US$3 billion), which reversed since H1:2024 given amortization and shorter mandated delays on imports. - Offsetting outflows: (i) debt service obligations to bondholders (about US$10 billion, including obligations on bonds related to importer debts, BOPREAL); (ii) net debt payments to official creditors (US$3.5 billion); (iii) discretionary interventions in FX parallel markets (US$1 billion). - NIR rose by around US$6 billion during 2024 but declined by US$4.0 billion through end-March (weaker trade balance, rising parallel market interventions US$2 billion, growing uncertainties). NIR currently stands at negative US$6.4 billion, consistent with gross international reserve coverage of only about 20 percent of the ARA metric. - Overall external position improved relative to 2023 but remains weaker than levels implied by medium-term fundamentals and desirable policies. ### Financial sector and credit developments - Reforms to improve monetary transmission and reduce distortions: (i) eliminate mandatory minimum interest rates on deposits and limits on bank lending rates; (ii) limit access to repos to entities regulated by the BCRA; (iii) downsize credit incentive schemes, eliminate compulsory lending to MSMEs, narrow range of credit products eligible for differentiated minimum reserve benefits. - Private peso bank credit currently stands at only 7 percent of GDP; peso-denominated credit expanded up almost 80 percent since April 2024 in real terms. - Banks’ exposure to the public sector reduced from about 46 percent at end-2023 to 35 percent in January 2025. - FX developments: relative stability of bank FX deposits after the tax amnesty led to a gradual rise in FX bank credit to exporting firms; firms issued FX bonds at favorable rates (well below sovereign rates). - Banking sector metrics: banks remain highly liquid (37 percent for peso deposits and 67 percent for FX deposits), well capitalized (29 percent of risk-weighted assets), and with limited currency mismatches. ### Structural reforms and market deregulation - Continued implementation of reforms from the December 2023 Deregulatory Emergency Decree (DNU) and the June 2024 Ley Bases focusing on deregulation, state modernization and reduction, and easing barriers to external trade and investment. - Early reforms in product markets (network industries and services) are increasing competition and market dynamism by reducing administrative and regulatory burdens. - State efficiency and governance improvements via closure of several decentralized agencies and trust funds, rationalization and potential privatization of some SOEs, and automation/digitalization of administrative processes. - Enacted labor market reforms expected to facilitate more flexible wage negotiations and simplify termination processes. - Easing of tariff and non-tariff barriers and customs improvements are enhancing competition and consumer welfare. Reforms expected to constrain rent-seeking and corruption by vested interests. ### Macroeconomic outlook and risks - Baseline assumptions: strong policy implementation and timely external financing to transition from stabilization to recovery. - Real GDP growth: after contracting by around 1.7 percent in 2024, real GDP is projected to expand by 5.5 percent in 2025, driven by robust domestic demand and statistical carryover from H2:2024; annual growth expected to converge to around 3 percent over the medium term. - Inflation: annual inflation projected to fall to around 18–23 percent by end-2025, from 118 percent at end-2024, supported by the fiscal anchor and strengthened monetary and FX framework. - Fiscal baseline: primary surplus of 1.3 percent of GDP in 2025 (in line with the draft 2025 budget and consistent with an overall cash balance); the primary surplus could be higher if revenues overperform or the interest bill rises. Primary surplus projected to rise to around 2½ percent over the medium term. - External baseline: current account expected to shift from a surplus of 1 percent of GDP to a deficit of 0.4 percent of GDP in 2025, reflecting less favorable terms of trade, cyclical recovery of domestic demand, and further easing of current account restrictions. Medium-term expectations include broadly balanced current account and improved reserve coverage (reaching 100 percent of the ARA metric by 2030) with structural reforms to encourage FDI and leverage energy and mining potential. - Upside and downside risks: elevated downside risks from a challenging external backdrop (trade tensions, tighter global financial conditions, commodity price declines), climate shocks, and electoral-cycle-related volatility; sizeable upside risks if program implementation continues and reforms accelerate, particularly in energy and mining. - Note: the new large investment incentive scheme (RIGI) has attracted over US$12 billion investment bids. *Source: IMF staff chapter "7. Social conditions have improved, though remain" from the PDF.* ### 17. The new program aims to enhance the consistency and predictability of macroeconomic ### 17. The new program aims to enhance the consistency and predictability of macroeconomic policies ### Program objectives and pillars - Objectives: - Entrench macroeconomic stability, both domestic and external. - Support policies that would boost long-term growth prospects and living standards. - Enable a timely re-access to international capital markets to help address large balance of payment needs, while allowing a gradual reduction in Fund exposure. - Three policy pillars: - Fiscal Policy: Safeguarding the fiscal anchor by improving the quality of fiscal consolidation and maintaining adequate social and infrastructure spending. - FX and Monetary Policy: An immediate transition to a more robust FX and monetary policy framework involving initially a sufficiently flexible exchange rate regime within bands, targets for reserve accumulation, tight monetary conditions, and a well-calibrated easing of remaining FX restrictions and controls. - Structural Reforms: Market reforms and de-regulation efforts, complementing an overhaul of the tax system and improvements in governance frameworks. ### Macro stabilization logic and contingencies - Program success depends on progress across the three policy pillars, with contingency plans as a backstop amid rising global risks. - Fiscal anchor and monetary enhancements are designed to: - Deliver stability. - Support transition to a more robust FX regime that allows the real exchange rate to converge to its equilibrium. - Strengthen Argentina’s external position. - Liberalization of FX restrictions will be calibrated and gradual to limit instability. - Authorities prepared to tighten fiscal and monetary policies, among other adjustments, as needed (see ¶27). - Expected outcomes if credible and durable stability is achieved: - Reduced borrowing costs. - Secured fiscal and external sustainability. - Groundwork for re-access to international capital markets. - Medium-term growth boost from well-sequenced structural reforms that lift living standards and reduce poverty. ### Fiscal Policy - Fiscal rule and rationale: - Continue consistency with the authorities’ zero overall deficit fiscal rule to break history of fiscal dominance and central bank financing. - Rule anchors spending discipline given absence of fiscal space and elevated budget rigidities. - Consideration later for a more flexible framework with a debt anchor and expenditure-based operational targets once consolidation is credible. - 2025 target: - Authorities will target a cash primary surplus of 1⅓ percent of GDP to achieve their overall balance target in 2025. - Revenue and spending assumptions for 2025: - Revenue losses from elimination of impuesto pais, last year’s pre-payment of wealth taxes, and temporary reduction in export taxes expected to be partly compensated by yields from reinstated personal income tax and projected cyclical recovery. - Primary spending projected to remain contained, growing by 3 percent y/y in real terms. - Spending priorities: further cuts in subsidies and improvements in public sector efficiency offsetting increases in pensions (consistent with the indexation formula) and public investment (from low levels) while maintaining adequate social assistance. - Fiscal adjustment composition (percent of GDP, national government) — table summary reproduced exactly: - 1. Unwinding of one-off revenues -1.3 - Elimination of PAIS tax -1.1 - Impact from 2023 devaluation -0.2 - Fiscal Package (tax moratorium, tax amnesty, wealth tax) -0.2 - Export tax (base effect) 0.2 - 2. Revenue measures 0.4 - PIT reform 0.2 - Fuel excises 0.3 - Temporary reduction in export taxes -0.1 - 3. Expenditure measures 0.8 - Reduction in subsidies 0.6 - Better targeting of social assistance 0.2 - 4. Higher tax buoyancy and spending indexation -0.3 - Social security contributions 0.6 - Non-tax revenues -0.3 - Pension spending -0.6 - 4. Other expenditures -0.1 - Total -0.5 - Medium-term structural fiscal reforms (selected actions and timing): - Tax policy and revenue administration: - Develop an ambitious revenue-neutral tax reform (relative to 2022) that gradually removes the most distortive taxes, reduces inefficient tax expenditures, and significantly simplifies the tax system; reform proposal to be shared with Fund staff (end-December 2025, SB); implementation expected to start no later than 2026 (requires congressional approval). - Strengthen tax and customs administration, implement Compliance Risk Management (CRM) framework, drawing on TADAT findings completed in March 2024. - Reform revenue-sharing system to tackle provincial and municipal taxes (MEFP ¶16, second bullet). - Spending quality and efficiency: - Bring public expenditure as a percentage of GDP to pre-2005 levels while improving state efficiency and quality of public goods. - Align energy tariffs with cost recovery for higher income households and commercial users; replace complex tariff segmentation with a single energy subsidy for low-income households (MEFP ¶16, third bullet). - Adopt reform to improve competition in wholesale electricity market (end-November 2025, SB). - Prepare comprehensive pension reform to enhance equity and sustainability (end-December 2026, SB). - Public financial management: - Close all but one extra-budgetary trust fund (end-December 2025, SB), retaining fiduciary fund for residential gas subsidies. - Develop plan to eliminate inefficient extra-budgetary entities and enhance governance (end-September 2025, SB). - Strengthen institutional capacity for transparent privatization of SOEs included in Ley Bases; publish assessment and plan for privatization and concessions (end-September 2025, SB). - Harmonize administrative databases into single social registry (Sistema de Indicadores Sociales, SIS) in collaboration with developing partners (end-December 2025, SB). - Expand coverage of integrated system of financial information (Sistema Integrado de Información Financiera, e-SIDIF) to include other government bodies (end-December 2025, SB). - Fiscal frameworks: - Publish a medium-term fiscal framework and a detailed fiscal risk statement (end-September 2026, SBs). - Amend Fiscal Responsibility Legislation to enshrine zero-overall fiscal deficit rule into law (end-December 2026, SBs); consider adaptations over time to better manage shocks. ### Financing Policy - Debt sustainability projections and risks: - Under baseline policies, net public debt (excluding intra-public sector components) projected to decline from about 52 percent of GDP at end-2024 to around 31 percent of GDP by end-2030, conditional on sustained program implementation and timely re-access to international capital markets at reasonable rates and conditions. - Public debt is judged sustainable, but not with high probability, given relatively large gross financing needs over the medium term averaging 8 percent of GDP (excluding intra-government debt service). - Agile public debt management and official creditor financing remain essential. - Peso debt strategy: - Gradual lifting of FX controls implies more onerous domestic financing conditions, with Treasury bearing full cost of conducting monetary policy (MEFP ¶17). - Reduce domestic financing risks by extending maturity profile and improving debt instrument structure as disinflation proceeds. - Enhance predictability of auctions and build benchmark bonds to support secondary market liquidity and price discovery. - Note on LeFi: The government issued a new one-year instrument - Letra Fiscal de Liquidez (LeFi) – in July 2024, at a nominal value of ARS$20 trillion (3.5 percent of GDP), replacing some government securities on the BCRA balance sheet in market-equivalent value; LeFi interest rate variable and equals the monetary policy rate set by the BCRA, with interest costs capitalized; LeFi can only be traded with banks at nominal value and is not marketable; special Treasury account set up at BCRA where interest cost incurred by the BCRA on monetary policy is deposited. - External financing strategy with private creditors: - Decisive program implementation and early reserves buildup expected to narrow sovereign spreads and re-access international capital markets at more favorable terms by early 2026 (MEFP ¶18). - Financing would be used to better manage large obligations falling due, not to increase external indebtedness; authorities commit to early reductions in Fund exposure if conditions permit. - Continue efforts to address pending litigation and reach understandings on outstanding obligations where final judgments have been reached. - External financing strategy with official creditors: - World Bank and IADB projected to provide US$2 billion in net financing after interest payments in 2025 to support fiscal and social reform efforts, including budget support operations that would rebuild reserves (MEFP ¶19). - Firm financing assurances assessed in place from China to refinance drawn portion of PBOC swap (US$5 billion) falling due starting in mid-2025 and to renew financing of the hydro-dam project in line with implementation progress. ### Monetary and Exchange Rate Policies - Strategic shift: - Transition toward a robust monetary and FX policy framework to durably bring down inflation and rebuild external buffers. - Move to a more flexible exchange rate regime that balances domestic and external stability, with private M2 as an intermediate target and strict limits on net domestic assets as an additional nominal anchor in a widening exchange rate band system. - Provide pathway to a fully flexible exchange rate in a bi-monetary system where the peso and U.S. dollar coexist. - Key transition actions: - Enhancing FX flexibility: - Immediate transition toward a more flexible exchange rate framework to decisively rebuild reserves, limit overvaluation risks, and regain international market access on a timely basis. - Under the new framework, the exchange rate would float within a sufficiently wide exchange rate band to permit price discovery, with FX purchases within the band consistent with reserve accumulation goals. - The NIR (net of Fund disbursements) is set to increase by at least US$4 billion this year (performance criterion); NIR target remains a main anchor (MEFP ¶20). - Authorities do not expect to intervene in NDF markets or parallel FX markets unless disorderly conditions arise. - Refining the monetary framework: - Monetary policy will remain tight to support peso demand and disinflation. - Authorities will abandon current broad monetary base ceiling (of ARS 47.7 trillion) and instead monitor private M2 (net of remunerated deposits). - Establish strict limits on net domestic assets (indicative target) with short-term policy interest rates playing a more active role to support the band and gradual re-monetization, in coordination with the Treasury (MEFP ¶21). - In event of negative shocks to money demand, interest rates will adjust to secure adherence to strict NDA limits through sterilization operations involving both the BCRA and Treasury as needed. - New framework supported by recent actions to rationalize reserve requirement regime and improve bank liquidity management. - Gradual lifting of remaining FX restrictions and controls: - Unwinding distortive FX restrictions initially focusing on lifting current account restrictions (elimination of export incentive scheme, reduction of delays on import payments) and easing households’ ability to convert peso deposits into USD. - Existing withholding taxes (30 percent) on outbound tourism and FX credit card purchases by households would remain in place to limit capital outflow risks. - Current limit on households purchase of USD (US$200 per month) would be eliminated. - Capital account restrictions applying to the large FX backlog on dividends and intra-company debt payments will be eased only gradually; restrictions on new capital flows (beyond those already allowed in the large investment incentive scheme, RIGI) will be lifted. ### Key numerical targets, timelines, and other facts - Argentine exports to the United States reached US$ 6.5 billion (about 1 percent of GDP) in 2024; direct impact of a 10 percent tariff is small (under 0.1 percent of GDP), even after considering higher U.S. tariffs on aluminum and steel imports (exports to US are worth only US$0.6 billion). - Argentina has run a fiscal primary surplus in only 13 of the last 65 years. - Over half of all primary spending is indexed to inflation and over 40 percent of revenues are co-participated with subnational governments. - The overall fiscal balance would be about 0.2 pp of GDP lower assuming the accrued-but-not paid real component of the interest for zero-coupon bonds were to be recorded above the line. - Net public debt projected: about 52 percent of GDP at end-2024 to around 31 percent of GDP by end-2030 (conditional). - Gross financing needs over the medium term average 8 percent of GDP (excluding intra-government debt service). - Official creditor support projected: US$2 billion net financing in 2025 from World Bank and IADB; PBOC swap drawn portion US$5 billion falling due starting mid-2025. - LeFi instrument: nominal ARS$20 trillion (3.5 percent of GDP), issued July 2024. - NIR target: increase by at least US$4 billion this year (performance criterion). - Tax reform proposal to be shared with Fund staff by end-December 2025 (SB); implementation expected to start no later than 2026. - Wholesale electricity market competition reform: end-November 2025 (SB). - Closure of extra-budgetary trust funds except fiduciary fund: end-December 2025 (SB). - Elimination of inefficient extra-budgetary entities plan: end-September 2025 (SB). - Publication of SOE assessment and privatization plan: end-September 2025 (SB). - Harmonization into SIS social registry and e-SIDIF expansion: end-December 2025 (SB). - Medium-term fiscal framework and fiscal risk statement: end-September 2026 (SBs). - Amendment to Fiscal Responsibility Legislation to enshrine zero-overall fiscal deficit rule: end-December 2026 (SBs). - Comprehensive pension reform: end-December 2026 (SB). *Source: IMF staff summary of program chapter (text provided).* ### 25. Efforts will continue to facilitate a sustainable expansion of private credit. Credit to the ### 25. Efforts will continue to facilitate a sustainable expansion of private credit. Credit to the ### Credit expansion, supervision, and NBFI/Fintech risks - Credit to the private sector is expected to expand along with a further decline in the public sector’s exposure, as fiscal consolidation and re-monetization proceeds (MEFP ¶22). - Credit quality will require closer monitoring. - Regulations will be gradually aligned with Basel III standards on risk-based supervision. - Macroprudential policies will continue to contain FX mismatches (ensuring that FX lending backed by FX deposits is limited to exporters). - The regulatory framework will evolve to consider fast-growing nonbank financial institutions (NBFIs) and the Fintech industry. - Enhancements in institutional capacities will target cyber and cross-border money laundering risks (see ¶26, second bullet). ### Structural policies to boost productivity and market orientation - Ongoing reforms aim to durably strengthen macroeconomic fundamentals and address deep-seated structural challenges that have held back living standards; Argentina’s real per capita income shrank by over 10 percent during 2011– (text truncated). - Ministry of Deregulation and State Transformation will continue to implement Ley Bases and pursue additional deregulation reforms, mindful of capacity and political constraints and the need to limit dislocation effects. - Salient reform areas: - Market functioning: - Carefully sequenced reforms to strengthen product and labor market flexibility and reduce barriers to entry to encourage competition and formal employment. - Deregulatory agenda since December 2023 in network and services industries (example sectors: rental market; airline, road transportation, and pharmaceutical industries). - Extend efforts to reduce entry barriers and improve competition in other sectors (examples: navigation, processed food, fertilizers and herbicides). - Supported by recent enhancements and implementation of the Competition Law and ongoing assessments of anti-trust practices. - Labor market: continue encouraging adherence to a new framework allowing greater flexibility to negotiate wage and the severance regime at the sectoral level; consideration of a broader reform of the labor markets. - Market reforms to be complemented by a reform of the tax system (see ¶21) and active labor market policies to support worker mobility as import restrictions are lifted. - State deregulation and governance: - Consolidate state entities (trust funds, state offices, SOEs) and professionalize public service to improve state efficiency and rationalize unnecessary functions/structures (MEFP ¶24). - Ensure adequate provision of key public goods and services, and improve public financial management (see ¶21, third bullet). - Continue reducing bureaucracy and red tape, including expansion of digitalization of administrative processes and use of automatic authorization or tacit approval procedures. - Support governance agenda (MEFP ¶25, first bullet) aimed at: - (i) improving efficiency and transparency of public procurement processes; - (ii) strengthening anticorruption frameworks, including by updating the Public Ethics Law; - (iii) developing and implementing recommendations from the recent FATF report (MEFP ¶25, second bullet), with early priority on mitigating cross-border money laundering risks (end-September 2025, SB). - Reforms to be conducted in collaboration with Fund and other development partners. - Trade and FDI: - Gradual lifting of tariff and non-tariff trade barriers as fiscal conditions permit (MEFP ¶23). - World Bank Fiscal and Competitiveness budget support loan includes actions to expand agro-industrial export volumes (5 percent y/y in 2026) and facilitate access to intermediate and capital products, including by reducing customs clearance duration. - Implement RIGI to provide tax and regulatory predictability to incentivize large investment and encourage development of strategic sectors (especially energy, mining, agro-industry, and knowledge economy). - Address large infrastructure gaps and secure budget resources for timely completion of priority public infrastructure projects, including the second phase of the gas pipelines. - New regulatory framework for public-private partnerships, supported by the World Bank, to encourage private sector participation in infrastructure projects; close coordination with provincial governments envisaged. - Notable outcomes and context: - During 2024, the federal government cut 34,000 redundant jobs (11 percent y/y), supporting a 0.6 percent of GDP reduction in the wage bill. - Public enterprises achieved a surplus for the first time in 16 years. - Investment commitments totaling US$12.5 billion over the medium term, primarily from energy and mining companies, have already been agreed or announced. ### Contingency plans and policy recalibration - Authorities stand ready to recalibrate policies to evolving outcomes to meet program objectives; if external or domestic risks materialize and FX pressures emerge, authorities are prepared to tighten fiscal and monetary policies, among other adjustments. - Specific contingency actions: - Liquidity conditions would be tightened as needed (with interest rates rising endogenously) if negative shocks to money demand arise, consistent with the strict NDA ceiling, with the central bank and Treasury acting in coordination. - Fiscal policy would be tightened as required to safeguard reserve accumulation and stability, through measures available to the executive. - If revenues disappoint, authorities would reduce primary expenditure accordingly. - Any revenue overperformance would be either saved or used to reduce distortive export taxes (if the windfall is permanent) to support competitiveness. - Pace and sequencing of easing FX restrictions would be adjusted as needed (e.g., through a more gradual clearing of the dividend backlog) to safeguard stability. - Agile debt management would continue to secure refinancing of domestic debt. ### Program modalities — Financing needs and external gap - Large balance of payments needs expected to persist over the medium term due to: - Significant and rising public sector FX debt service obligations to private and official creditors (from US$15 to US$25 billion between 2025 and 2029). - Other obligations mainly related to the backlog on dividend and trade debt (of US$12–18 billion). - Early and sustained policy implementation to deliver adequate current account balances and sufficiently large net FDI flows (see ¶15, fourth bullet), together with official external financing commitments from the Fund and other official creditors, are expected to boost reserve coverage and secure a gradual re-access to international market access. - Argentina: External Gross Financing Needs (in US$ billions; accrual basis) — Average 2026-30 (figures as presented in table): - A. Financing needs (1+2-3) (- = net outflows): -47.0-50.0 - 1. Public sector: -13.6-21.1 - FX bondholders and BOPREAL: -6.0-6.4 - IMF: -3.1-8.9 - Other official: -4.5-5.7 - 2. Other 1/: -13.7-18.4 - Provinces: -1.2-0.7 - Private: -12.4-17.6 - 3. Gross reserve accumulation: 19.7-10.6 - B. Financing sources (1+2+3) (+ = net inflows): 31.8-47.9 - 1. Current account credits 2/: 7.3-15.6 - 2. Private FX flows (incl. FDI) 3/: 17.8-27.4 - o/w: to public sector: 0.5-6.4 - 3. Other official: 6.7-5.0 - C. External financing gap (A+B): -15.2-2.1 - Notes: - 3/ Includes net FDI + commercial and financial debt and private portfolio flows + other residual flows. - 1/ Includes income balances excluding public interest payments + net private assets formation + FDI assets + portfolio investment assets + errors and omissions. - 2/ Current account net of interest payments. - 2025 column source: IMF staff estimates. ### Access, duration, phasing, and use of Fund resources - Authorities request a 48-month extended arrangement under the Extended Fund Facility (EFF) with total access of 479 percent of quota (equivalent to SDR 15.267 billion, about US$20 billion) to support implementation of their policy reform plan. - Fund purchases will be used as budget support, with disbursements then used to buy back the Letras Intransferibles from the central bank to strengthen the BCRA’s balance sheet and rebuild international reserves. - Proposed arrangement would involve an increase in overall exposure by the end of the program (from 976 to 1115 percent of quota), given Fund repurchases of SDR 11 billion from September 2026 to April 2029. - Savings from the October 2024 Review of Fund Charges and the Surcharge Policy estimated to have reduced Argentina’s debt servicing costs to the Fund by about US$2 billion over 2025–29. - Phasing: - Upfront disbursement of SDR 9.160 billion (US$12 billion or 60 percent of total access). - First review in June and a second review in late-2025, with disbursements of: - SDR 1.529 billion (US$2 billion) - SDR 0.763 billion (US$1 billion) - Program shifts to semiannual reviews during 2026–29, with disbursements of SDR 545 million (about US$714 million) for each of the remaining seven reviews. ### Capacity to repay and Fund exposure risks - Staff assesses Argentina’s capacity to repay the Fund remains subject to exceptional risks, hinging critically on early policy actions and sustained implementation of the stabilization plan to deliver reserve accumulation goals and secure resumption of market access by the time repurchases come due. - Key risk metrics and projections: - Fund’s exposure would peak at SDR 43.1 billion in 2026 (the largest exposure in the history of the Fund). - Exposure would exceed 100 percent of gross international reserves until end-2027. - Exposure would remain above 1,000 percent of quota until end-2029. - Total Fund obligations would peak at over SDR 8.9 billion in 2030. - Overall gross external financing needs would average about 9 percent of GDP (excluding intra-public sector debt service) in the forecast period. - Peak obligations to the Fund would constitute about 9 percent of projected exports and 15 percent of projected central bank reserves and would persist at high levels for several years after the end of the program period. - Comparative context: - This compares to peak obligations of 26 of projected exports and 33 percent of projected central bank reserves for the 2018 SBA (after augmentation) and, respectively, 21 percent and 40 percent for the 2022 EFF. ### Financing assurances and MDB/partner support - Firm financing assurances are in place from official creditors over the next 12 months with good prospects for the remainder of the program. - Net financing from MDBs, including the World Bank and the Inter-American Development Bank (IADB) is projected to reach US$2 billion this year. - Staff assesses firm financing commitments from China are in place, including through: - Refinancing of the activated portion of the PBOC swap line. - Financing of a hydro-dam project conditional on implementation progress (as Argentine authorities work to overcome environmental and labor-related issues). ### Program conditionality, benchmarks, and prior actions - Program performance monitored by quantitative performance criteria (QPCs), indicative targets (ITs), and structural benchmarks (SBs) as set out in the MEFP and TMU. - QPCs include: - (i) a cumulative floor on the federal government primary balance; - (ii) a cumulative floor on the change in net international reserves of the BCRA; - (iii) a cumulative ceiling on BCRA financing of the federal government; - (iv) a ceiling on the federal government stock of domestic arrears. - Continuous QPCs on non-accumulation of external payments arrears. - ITs include a ceiling on the change in the BCRA’s net domestic assets (NDA) and a cumulative floor on the coverage of social assistance programs provided by the federal government. - Prior actions required for the EFF arrangement: - (i) Publication of a BCRA press release clarifying the new monetary and FX regime, consistent with introduction of an exchange rate band; - (ii) Publication of BCRA resolutions easing current account and capital account restrictions; - (iii) Issuance of an Emergency and Necessity Decree (DNU) eliminating the export incentive scheme (80/20). - Structural benchmarks include: - (i) develop a revenue-neutral tax reform that improves equity and efficiency; - (ii) implement resolution 21/2025 to deregulate the wholesale electricity market; - (iii) present to Congress a diagnostic report and proposal for pension reform; - (iv) eliminate all fiduciary funds (except fiduciary fund for residential gas subsidies); - (v) develop a plan to streamline inefficient extra-budgetary entities and enhance their governance; - (vi) publish a report on the SOEs included in Ley Bases, alongside guidelines and a plan for privatization and concession; - (vii) complete integration of relevant administrative databases into a single social registry; - (viii) develop options for reforming the complex revenue sharing system between federal and provincial governments; - (ix) submit to Congress the draft 2026 budget, consistent with the zero-overall budget deficit rule, with a medium-term fiscal framework, and a detailed fiscal risk statement and adverse scenarios; - (x) present a plan to revamp the Fiscal Responsibility Legislation; - (xi) publish the Fund TA report on an AML/CFT reform roadmap for improvements to address cross-border ML risks and the implementation of risk-based exemptions to enhance public sector efficiency. ### Safeguards assessment and BCRA reforms - Progress needed to support the enhanced monetary and FX framework: - (i) strengthen the BCRA’s balance sheet and its autonomy over time, including through legal reforms to the BCRA Charter; - (ii) ensure full adherence to international financial reporting standards (IFRS); - (iii) enhance the BCRA’s IT security policy and cybersecurity framework. - An updated safeguards assessment will be completed by the first program review; some priority recommendations may feed into program conditionality. ### Jurisdictional and Article VIII issues - Performance criteria will be established on: - the non-introduction and non-intensification of exchange restrictions; - non-introduction and non-modification of multiple currency practices. - Despite progress in eliminating FX restrictions and controls, Argentina continues to maintain many exchange restrictions and one multiple currency practice subject to Fund approval under Article VIII, Sections 2(a) and 3 (see Annex III). - Exchange restrictions include: - general restrictions on access to foreign exchange for current international transactions; - restrictions on payment for imports and on access to FX for invisible transactions (such as dividends, family remittances, interest and amortization of external loans); - an MCP arising from a 30 percent withholding tax on the purchase of foreign exchange by individuals for travel allowance and savings, the importation of a list of luxury items and payment for certain services. - Authorities request Board approval to maintain these exchange restrictions and the MCP on a temporary basis (to be phased out during the period of the arrangement). - Staff supports the request because the conditions for approval are met: measures are temporary (with elimination underpinned by a plan), maintained for balance of payments reasons, and the MCP measures do not give Argentina unfair competitive advantage over other members nor discriminate among members (while noting they come at the cost of substantial distortions). *Source: Extracted content from the provided IMF PDF chapter/section.* ### 36. Lending into arrears. Staff assesses that the authorities continue to make good faith efforts ### Lending into arrears. Staff assesses that the authorities continue to make good faith efforts ### Lending into arrears and creditor negotiations - Authorities continue good faith efforts under the Fund’s Lending into Arrears policy to resolve arrears to: - external private creditors that did not participate in the 2005/10 debt exchange or did not settle under the terms provided in 2016 and those to which there is debt outstanding from the 2001 default (about US$2.35 billion total), with the authorities closely monitoring evolving relations with these creditors; - Mobil Exploration, where negotiations remain underway on a repayment plan on principal claims (US$196 million). - Two external arrears claims remain under litigation: - Bpifrance Assurance Export, where the firm filed an appeal with the Supreme Court of Justice on December 2, 2022, after the Court of Appeal had rejected the extraordinary appeal submitted by the agency on grounds of statute of limitations; - Titan Consortium I, LLC, where a legacy claim is currently under litigation on grounds of statute of limitations. - Staff judgment: - Adequate safeguards remain in place for the use of Fund resources. - Argentina’s reform efforts are not undermined by developments in creditor-debtor relations. - Financing assurances reviews will continue to be conducted at each review of the EFF arrangement until the external arrears to private bondholders are resolved. ### Statistics - Fund technical assistance will continue to support the authorities in implementing the updated weights for the Consumer Price Index. - These are expected to be finalized and rolled out by the time of the second review of the program. ### Exceptional access (EA) assessment — summary - Staff assesses that Argentina meets all four exceptional access criteria, premised on: - steadfast and early implementation of the new policy package; - commitment to adjust policies as needed in response to shocks to ensure program objectives are achievable. - Staff caution: EA assessments will need close consideration at all program reviews given inherent uncertainties. ### EA Criterion 1 — balance of payments pressures - Judgment: criterion met. - Rationale: - Argentina continues to experience exceptional balance of payments pressures on the financial account. - Meeting large external debt service obligations during 2025 and beyond will require Fund exposure above normal access limits, with continued support of the broader international community. ### EA Criterion 2 — medium-term debt sustainability - Judgment: criterion met. - Rationale: - Under staff’s proposed baseline of strong and sustained policy implementation, public debt is assessed to be sustainable in the medium term but not with high probability. - Consistent with the Fund’s EA framework, adequate safeguards would be in place to meet EA2. - Should adverse shocks materialize, sufficient restructurable FX debt to the private sector would potentially be available after the new program to improve debt sustainability and enhance safeguards for Fund resources. - Assessment is robust to delays in market access. - Staff’s assessment hinges on sustained implementation of the proposed fiscal consolidation path and broader policy reforms to reduce inflation, boost reserve coverage, strengthen medium-term growth and harness energy wealth. ### EA Criterion 3 — prospects for market access - Judgment: criterion met. - Evidence cited: - Enhanced credibility of the fiscal anchor has resulted in credit upgrades and a sharp compression of external sovereign bond spreads, though spreads have jumped more recently due in part to rising global uncertainties. - A repo agreement to boost near-term liquidity was finalized (with spreads around 475 bps). - Key Argentine corporates have issued FX-denominated bonds at very favorable spreads (of around 300–500 bps) in recent months. - Authorities have set aside FX deposits to cover a portion of obligations due in July 2025. - Prospects for re-access to markets at more favorable rates during the remainder of 2025 and beyond are described as strong given: - planned actions to support the fiscal balance anchor; - planned upfront enhancements to the monetary and FX regime to sustain external surpluses, rebuild reserves and strengthen resilience; - ongoing pro-market reforms to boost productivity, competitiveness, and governance. - Planned unwinding of FX restrictions is expected to support FDI and projected structural improvements in energy and mining external balance. - A new Fund program with significant upfront support is expected to catalyze official support and timely market access. ### EA Criterion 4 — prospect of program success and capacity to deliver - Judgment: criterion met. - Rationale and supporting facts: - Authorities’ actions to date and commitment to early implementation of key FX policies. - Strong ownership and implementation track record: - Brought the previous 2022 EFF back on track, delivering the largest fiscal consolidation in decades, contributing to faster-than-expected disinflation and economic recovery. - Milei administration secured congressional approval for key structural and fiscal reforms (e.g., Ley Bases). - Most (18 out of 24) governors have signed a pact outlining key economic principles. - Presidential vetoes and decrees have been used to resist non-budgeted congressional spending and safeguard the fiscal anchor, including extending the 2023 budget into 2024 and 2025. - Program success hinges on building and sustaining broad social and political support; actions taken include a Decree of Necessity and Urgency (DNU) later ratified by a majority in the Lower House of congress with support of several opposition parties. - Completion of prior actions will demonstrate resolve to tackle long-standing challenges in monetary and FX policy frameworks and support external surpluses and reserve accumulation. - Articulation of specific contingency plans within the Executive’s control strengthens confidence in their application if needed. ### Enterprise risks - Major enterprise risks identified: - Near-term financial risks have declined since approval of the 2022 EFF but remain elevated over the medium term as repurchase obligations rise alongside private bondholders’ obligations. - Business risks (lack of program success) are high given complex economic, social, and political landscape, forthcoming mid-term elections, and a more difficult global outlook. - Reputational risks if the program goes off track with higher levels of Fund exposure. - Evenhandedness concerns could arise if the Fund is perceived as treating Argentina differently from other members. - Countervailing risk of delaying or not proceeding: - Not supporting the administration would raise risks, including foregoing support to an administration with a strong policy implementation track record that has veered the country away from a full-blown crisis. - Mitigating factors: - New program starts with markedly different initial conditions compared to previous Fund-supported programs, most notably a fiscal surplus and thus no support to meet the fiscal financing requirement. - Program viewed as a critical opportunity to restore external viability by rebuilding reserves, facilitating timely re-access to international capital markets, and catalyzing FDI. ### Staff appraisal — key findings and policy recommendations - Recent achievements and positives: - Since end-2023, administration has tackled inflation decisively through an ambitious fiscal anchor and actions to repair the central bank balance sheet. - Deregulatory and market reforms implemented to eliminate distortions and controls. - Economic activity is recovering strongly, real wages are increasing, poverty indicators are declining, supported by significant expansion in targeted social assistance. - Ownership is strong with a convincing track record observed. - Remaining vulnerabilities and structural challenges: - Reserves coverage remains very weak. - Government has not yet accessed international capital markets. - More work needed to anchor inflation and strengthen the external position and resilience. - Structural obstacles: inefficient and complex tax system, relatively closed economy, limited flexibility in labor and product markets, widespread labor informality. - Objectives of the new EFF: - Support the next phase of the stabilization plan to deepen and sustain stabilization and growth gains. - Support balance of payments through a strong policy package with immediate upfront actions to balance domestic and external stability objectives. - Focus on reforms to strengthen fiscal anchor, transition to a more robust monetary and FX policy framework, and deepen market-based reforms. - Fiscal policy guidance: - Fiscal policy must remain anchored; adjust the primary fiscal surplus as needed to safeguard domestic and external stability and secure fiscal sustainability. - Enhance quality of the fiscal anchor through: - (i) improving the efficiency and equity of the tax system; - (ii) strengthening the revenue sharing system and fiscal discipline incentives across levels of government; - (iii) boosting sustainability of the pension system. - Reforms should be well-sequenced, mindful of capacity constraints, and supported by technical assistance and political consensus-building. - Debt management and market re-entry: - An agile debt management strategy is crucial to reduce peso rollover risks and ensure timely re-entry to international capital markets. - Progress welcomed on improving domestic debt structure: extending maturities, shifting away from inflation and FX-linked securities, extinguishing most put options. - Complementary actions: enhance predictability of auctions, expand benchmark bonds to support secondary market liquidity and price discovery. - Rebuild external buffers and re-access international capital markets in a timely and sustainable manner without increasing net indebtedness. - Continue efforts to mobilize additional multilateral and bilateral official financing. - FX regime and monetary policy recommendations: - Transition to a fully flexible exchange rate in the context of a bi-monetary system (peso and U.S. dollar coexistence) is supported but will take time. - Immediate actions needed to strengthen policy buffers and frameworks to secure early success of the transition. - Authorities to gradually lift FX restrictions and allow the exchange rate to float within a sufficiently wide band to permit price discovery while allowing FX purchases to meet reserve accumulation goals. - Strict implementation of the new framework is essential to rebuild reserves and secure timely re-entry to capital markets. - Monetary policy should be very proactive: - Transition from a broad monetary base ceiling to a limit on central bank net domestic assets. - Short-term policy interest rates to play a more active role to support exchange rate bands and boost peso demand, including through central bank sterilization operations coordinated with the Treasury. - Continue streamlining the reserve requirement regime and maintain prudent macroprudential policies to avoid FX mismatches. - Structural and governance reforms: - Deepen deregulatory and market reforms, building on Ley Bases and the new regime to encourage large investments in strategic sectors. - Develop a detailed reform roadmap to: - (i) increase product and labor market flexibility and carefully open the economy further; - (ii) strengthen state efficiency; - (iii) improve governance and transparency, aligning anti-corruption and AML/CFT frameworks with international best practices. - Contingency preparedness: - Authorities must be prepared to implement agreed contingency measures to secure program objectives amid elevated global risks and electoral uncertainties. - If external tensions or further risks materialize, authorities should be ready to aggressively tighten fiscal and monetary policies and adjust the pace and sequencing of easing FX restrictions as needed. *Source: https://www.imf.org/-/media/files/publications/cr/2025/english/1argea2025002-print-pdf.pdf (content unit: page 36).* ### 49. Continued ownership and broadening political and social support will be essential for ### 1argea2025002-print-pdf - 49. Continued ownership and broadening political and social support will be essential for ### Program ownership, political support, and reform priorities - Continued ownership and broadening political and social support will be essential for program success. - Priority actions: continue to deliver on disinflation and growth, ensure adequate social assistance, and enable fairer burden sharing in resource reallocation. - Many structural measures under the program—tax, revenue sharing, pension, and labor reforms—will require Congressional support. - Attention needed to policies that mitigate potential dislocation costs from reforms and ensure a level playing field in regulation. ### Staff support for authorities’ request and program risks - Staff supports the authorities’ request for a 48-month EFF with access equivalent to SDR 15.267 billion (479 percent of quota). - The authorities have developed an ambitious program to support the transition to the next phase of their stabilization and growth plan; policy actions since taking office in December 2023 demonstrate ownership and commitment. - Key implementation priorities: consistent and decisive program implementation and clear communication to foster broad-based understanding of the program’s key actions. - Vulnerabilities remain high due to very weak reserve coverage, large FX obligations over near to medium term, and elevated and rising global risks. - Despite risks, on balance the program as calibrated offers a singular opportunity to help lift Argentina out of its prolonged crisis. - Staff supports Board approval to maintain, on a temporary basis, the exchange restrictions and one MCP in place; rationale: measures meet criteria for Board approval (maintained for balance of payment reasons, temporary, and the MCP does not discriminate among members or give Argentina an unfair competitive advantage). ### Ex-Post Evaluation (EPE) of Exceptional Access under the 2022 EFF — main findings and lessons - Context: 2022 EFF approved amid large imbalances, shocks from the global pandemic and the War on Ukraine, and the legacy of the 2018 Stand-by Arrangement with large repayments during 2022–23. - Assessment: policy strategy underpinning the 2022 EFF was less ambitious relative to what was needed to resolve Argentina’s BoP problem and restore medium-term external viability. - EPE findings: - Safeguards in the overall risk management framework (strength of program policies, capacity to repay assessment, exceptional access criteria) were insufficiently strong to contain risks to the Fund. - Insufficient consideration was given to FX flexibility to address underlying shocks. - The program helped ease Argentina’s financial burden from the 2018 SBA, may have obviated worse outcomes (large and difficult-to-manage arrears), and provided a vehicle for a significant turnaround by the new government taking office in December 2023. - Issues for reflection highlighted by the EPE: - Whether the Fund’s lending policy framework is well suited to manage complex cases with very large repurchase obligations or where resolving a deeply entrenched BoP problem through a single arrangement appears infeasible; consideration of alternative options and/or risk mitigants is warranted. - Whether enhancements to assessments of members’ capacity to repay are necessary, especially when subject to “exceptional risks.” - Whether the Fund’s decision to provide technical assistance to facilitate debt restructuring outside of a Fund-supported program was adequate and warranted. - Whether repeatedly approving program reviews on the basis of "temporary” FX restrictions and controls should be reconsidered, especially if these become substitutes for needed policy adjustments. - EPE underscores importance of strong and transparent contingency policy plans in the presence of high implementation risks, timely and comprehensive discussion of enterprise risks, and cautions that involuntary debt operations are not a substitute for strong policies. - Many EPE findings incorporated into the design of the proposed new EFF, including: - Ensuring strong upfront actions to gradually unwind FX restrictions and increase FX flexibility. - Maintaining adherence to strong fiscal discipline and sustained elimination of monetary financing. - Ensuring stronger program ownership by aligning policies with the Milei administration’s reform agenda. - Emphasizing reforms to address bottlenecks to sustainable and robust growth. - Removing the inactivated portion of the PBOC swap from gross reserves to allow a more accurate assessment of capacity to repay. - Incorporating recommendations from the 2018 SBA EPE: greater burden sharing with other official creditors; agreement on contingency planning in case shocks materialize; agreement on clear and implementable limits to foreign exchange sales in the context of a wide-enough exchange rate band. ### Disinflation and relative price adjustments - Drivers of inflation during 2020–23: - Rise in inflation largely driven by sharper increases in goods inflation. - Loose fiscal policy financed by money creation led to annual inflation in triple digits despite price controls and repressed prices on regulated services. - Goods inflation outpaced services inflation, reflecting regulated price policies and intensification of import restrictions (including SIRA/SIRASE), translating into higher goods prices and corporate margins in limited competition context. - Between December 2019 and November 2023, overall prices rose by cumulative 894 percent, with the price of goods rising 1½ times more than the price of services. - Real wages fell by 9.3 percent between December 2019 and November 2023. - Disinflation since late-2023: - Rapid disinflation driven by price of tradable goods, supported by trade liberalization measures. - Headline monthly inflation dropped from a peak of 25 percent in December 2023 to 2.4 percent in February 2025, with six-month-ahead expectations narrowing below 2-percent. - Decline occurred despite dismantling of price controls and increases in regulated prices; disinflation driven by sharper decline in goods inflation supported by crawling peg regime and easing of import restrictions (tariffs and non-tariff barriers) and elimination of impuesto pais in December 2024 after five years in place. - Overall prices have risen by 186 percent since November 2023; services prices have risen 253 percent (outpacing goods by more than 1½ times), consistent with a 17 percent increase in real wages since their lowest level of March 2024. - Ongoing challenges and policy implications: - Macroeconomic policies should remain tight to support further reduction in services inflation (still above a three-month average of 3½ percent m/m). - Efforts needed to bring utilities closer to cost recovery (currently at 80 percent) and to contain potential wage pressures (Argentina’s wages in USD are back to early 2018 levels and are now above comparable wages in peer countries). - Further declines in goods inflation should be supported by further opening of the economy to trade. - Transition to a more robust monetary and FX regime will help avoid misallocation between tradable and non-tradable sectors and overvaluation risks. ### Poverty dynamics and social assistance measures - Deterioration and recent improvement: - Until recently social conditions had deteriorated since 2017 due to high and persistent inflation, falling real wages, and rising informality; income per capita fell by 11.3 percent since 2017 compared to a rise of 5 percent for average peer Latin American economies. - Poverty rates rose to around 53 percent in H1:2024—the highest since 2003—but declined sharply to 38.1 percent through end-2024; extreme poverty improved from 18 to 8.2 percent over the same period. - The authorities’ emphasis on reducing inflation was pivotal in reversing the initial increase in poverty, supported by faster-than-anticipated recovery in demand and real wages. - Social assistance reforms and impacts: - Benefits under flagship conditional cash-transfer programs—the universal child allowance (AUH) and food support (Alimentar)—nearly doubled in real terms since November 2023. - In March 2024, adjustments to social transfers in line with inflation were introduced; overall assistance now covers about 100 percent of the basic food basket (compared to 55 percent previously). - In September 2024, benefits were expanded to cover 500,000 more children up to the age of 17 (previously targeted families with children under 14). - About 66 percent of children under 14 live under the poverty line, compared to 30 percent for those aged 65 or older. - World Bank estimates suggest that without higher cash benefits and coverage under AUH and Alimentar, extreme poverty may have been 20 percent higher. - A more transparent pension indexation formula and one-off transfers led to a 38 percent increase in the real minimum pension since November 2023. - Remaining challenges and recommended actions: - Durably reducing poverty requires tight macroeconomic policies, implementation of supply-side reforms to boost productivity, investment and formal employment, and measures to support labor mobility to higher comparative advantage sectors. - Further efforts needed to protect the most vulnerable and expand coverage and efficiency of social assistance; Argentina’s social safety net covers 40 percent of the informal population younger than 65, but some segments (childless informal workers) lack coverage. - Advancing creation of a single social registry could ensure social programs effectively reach the most vulnerable; efforts needed to improve governance and efficiency of programs at federal and provincial levels. - Poverty measurement notes: - Argentina’s national poverty (extreme poverty) line is defined at around US$15.3 (US$6.9) per day per adult and above lines used in other countries. - Based on international poverty line of $6.85/day PPP, Argentina’s overall poverty rate at 13 percent in 2023 is low compared to regional LAC average around 25 percent (World Bank Poverty Assessment, 2024). ### Energy and mining potential — recent developments, projections, and policy implications - Energy balance and recent improvement: - Energy trade surplus reached almost US$6 billion in 2024 (US$5.5 billion), driven by increased exports (US$1.8 billion) and lower imports (US$3.7 billion). - Drivers: rapid rise in oil and natural gas production at Vaca Muerta shale field supported by upstream investment over 2022–24 of about US$30 billion; improvements in transportation infrastructure (oil pipeline upgrades allowing expansion of oil exports to Chile; construction of a natural gas compression station allowing partial substitution of LNG imports); and ongoing transition to renewable energy sources. - Near-term outlook: - Energy balance set to improve by an additional US$3 billion in 2025 as major infrastructure projects come online (expansion of an oil pipeline from Vaca Muerta to seaports adding 200 thousand bpd; reversal of the northern gas pipeline; construction of two additional compression plants). - The latter two projects expected to reduce natural gas imports by an additional 40 percent. - Medium-term outlook: - Energy sector projected to generate a trade surplus of US$15–18 billion by 2030 and add about ½ percentage points in annual real GDP growth. - Projections supported by current upstream investments and further infrastructure improvements: new oil pipeline to the south (expected by 2027); second stage of gas pipeline (expected by mid-2026); new LNG floating facility (expected by 2027) expected to add 10–12mm3/d to natural gas export capacity (doubling current exports). - Upside risk: further infrastructure expansion could allow the energy balance to reach as much as US$ 30 billion by 2030. Net impact on reserves would be smaller because expanding shale energy production requires continued import-intensive investment. - Mining sector prospects: - Argentina has some of the world’s largest copper and lithium reserves; some analysts project a ten-fold increase in exports from the current level (US$0.7 billion). - Ongoing projects at production or development stage and announcements of additional projects, including under the RIGI regime (e.g., a US$2.5 billion lithium project by Rio Tinto). - Policy implications: - Harnessing energy and mining potential requires durable macroeconomic stability and stronger, more predictable tax and regulatory frameworks that safeguard a level playing field (especially vis-à-vis the state-owned energy company) to attract investment. - RIGI regime needs transparent implementation, accompanied by a credible plan to ease remaining FX restrictions and improved coordination with provincial governments. - Macroeconomic policies should be designed to ensure a portion of energy and mining windfalls are saved (to limit Dutch disease) and used to strengthen international reserves. - Lower world energy prices remain a downside risk. - Footnotes and sector facts: - Energy production at a 20-year maximum: country producing 700 thousand bpd of oil and 150mm3/d of natural gas; Vaca Muerta accounts for about one third of overall production; about 30 percent of oil and 7 percent of natural gas was exported in 2024. - Solar and wind represent about 15 percent of total electricity supply — a six-fold increase since 2018. - US EIA estimates recoverable resources at Vaca Muerta at 16 billion barrels of oil (resource horizon about 60 years at current production levels) and 9 trillion cubic meters of natural gas (resource horizon of 160 years). - Some projects backed by signed agreements and memorandums of understanding (e.g., agreement between state-run YPF and Shell on expanding LNG facilities). *Source: Excerpts from the IMF document provided (content unit: 1argea2025002-print-pdf - 49. Continued ownership and broadening political and social support will be essential for).* ### Box 5. Potential Growth Impact of Structural Reforms ### Box 5. Potential Growth Impact of Structural Reforms ### Overview and context - Analysis of potential output gains from structural reform efforts that would begin to close existing gaps (or bottlenecks to growth) relative to a frontier emerging economy. - In late-2023, Argentina faced important structural impediments to growth that had aggravated over the past decade: widening structural gaps across most categories, especially on the external sector and credit front, reflecting increased FX restriction as well as increased price and interest rate controls, which intensified through 2023. - Governance indicators weakened, likely reflecting increased rent-seeking amid rising import controls and concerns in the application of the rule of law. - Labor markets remained highly inflexible with serious barriers to formal employment from high payroll taxes and hiring/firing costs; bureaucratic and administrative burdens added to the cost of doing business. ### Key quantified impacts (IMF staff analysis based on Budina and others (2023)) - Bringing levels of governance and business regulation reforms closer to EMs in the 75th percentile range (e.g. Poland, Costa Rica) could boost output by over 1½ ppts per year over five years. - Reducing external restrictions in line with EMs in the 50th percentile range (e.g. Brazil) could increase output by an additional 2¾ p pts per year over the same period. - A more disaggregated analysis indicates governance and doing business reforms should focus on enhancing regulatory quality and easing administrative requirements, where gaps are largest relative to frontier EMs. - Unlocking the full potential from external sector liberalization requires reducing tariff and non-tariff trade barriers and enhancing financial openness and liberalizing the exchange rate regime, as proposed under the program. ### Reform areas, measures, and recent implementation (summary of deregulation and market reforms implemented since December 2023) - State Transformation, Efficiency, Transparency and Accountability: - Eliminate 16 trust funds and more than 300 state offices with overlapping or obsolete tasks. - Create of special unit to monitor SOEs, improve transparency/governance, while advancing the privatization agenda. - Establish public sector hiring standards (e.g., subject to test-passing). - Require state branches to initiate retirement process of eligible employees (around 10,000). - Implement a positive silence principle to around 500 proceedings requiring state clearance. - Strengthen transparency in the use of public resources by state universities, decentralized offices, and SOEs: - state branches can no longer hire staff/services and purchase goods through subcontracts with state universities; - state universities must adopt electronic procurement platforms; - all public administration entities must adopt digital platform for the management of public resources and payments. - Business Deregulation: - Remove state control on prices, market intervention, supermarket restrictions, mandatory weekly price reporting, and other excessive paperwork. - Ministries must submit a list of decrees/laws/resolutions to repeal or streamline; citizens can submit online proposals on deregulation. - Deregulate, reduce entry barriers and foster competition across sectors including agribusiness, airlines, overland transport, healthcare, insurance, pharmaceutical, and energy. - Credit and Capital Markets Deregulation: - Complete deregulation of warrants, now applicable to cover any type of good, be issued by any type of company, and be traded without restrictions on free platforms. - Simplify framework to allow SMEs and financial trusts to issue low/medium amounts of securities without previous authorization of the securities commission (CNV). - Allow productive sectors to finance the purchase of machinery by issuing IOUs, whose value fluctuates with the price of the good being produced. - External Trade and FDI Reform: - Repeal export/import bans, ease export/import taxes. Reduce custom costs and non-tariff barriers (e.g., discretionary import delays, opaque financial assessments, excessive anti-dumping protection). - Repeal Buy Argentine Law, and public procurement quota prioritizing specific domestic suppliers. - Remove surcharges, reference values, and redundant compliance stamps. - Allow importers to move shipping containers awaiting customs clearance to private warehouses. - Establish large investment incentive program (RIGI) to attract investment in projects over US$ 200 million. - Labor Deregulation: - Allow self-employed individuals to hire up to 3 employees without a contract-based relationship. - Give employers registering informal workers entitlement to a partial write-off of unpaid employers’ social security contributions. - Streamline workers' registration process and extension of probation period. - Repeal presumption of an undisclosed hiring contract whenever a vendor systematically issues invoices on account of the services supplied to firms. - Allow option of replacing current severance payments framework by a mutual agreement between parties. - Allow workers to choose their health insurance (9% of wage), eliminating compulsory union intermediation. ### Sequencing, social support, and durability of gains - Durability of gains depends on sequencing and social support for reforms. - Openness reforms should proceed alongside efforts to improve overall competitiveness (reducing excessive tax and regulatory burdens) and enhance the economy’s ability to adjust to shocks. - IMF research indicates labor and credit market reforms are more effective and less socially disruptive after a first wave of reforms in governance, business regulation and the external sector removes the most binding barriers to growth. - Better communication, inclusive policy design, and strong institutional frameworks are critical to raising awareness, correcting misperceptions, and fostering trust to build social acceptability and increase likelihood of implementation and sustainability of reforms (Oct 2024 WEO Chapter 3, IMF). ### Methodology notes and additional findings - Spider charts show structural gaps between Argentina and the Emerging Market frontier in governance, business regulation, and external sector; structural gaps range between 0 and 1. - Results use the average of coefficients over 4 to 5 years and showcase only the statistically significant results at the 10% level. - Box includes inputs from the IMF Research Department (Andrea Medici and Marina M. Tavares). Frontier is defined as the best performing economy across emerging markets in each reform indicator (each year). *Source: Fraser Institute (2023 release), World Bank, and IMF staff calculations.* ### Box 7. Argentina’s Tax System and Reform Considerations ### Box 7. Argentina’s Tax System and Reform Considerations ### Overview of the current system - General government tax revenues reached 22 percent of GDP in 2022. - The system is described as overly complex and distortive, with a narrow tax base and weak compliance amid fairly high statutory rates. - There are more than 155 taxes, adding to administrative burdens. - Only six taxes (CIT, social security contributions, VAT, financial transaction, export taxes, and provincial turnover tax) represent over 80 percent of overall tax revenues. ### Main distortions and equity issues - Indirect taxes represent over half of all taxes, reducing progressivity. - Tax exemptions (including to support production in regions like Tierra del Fuego) contribute to inequities. - Reliance on distortive taxes is especially high: - Export taxes, financial transaction taxes, and the cascading provincial turnover tax (which does not allow for deduction of taxes paid at earlier stages) represent around one-third of all taxes. - The provincial turnover tax and other distortive levies weigh against: - external competitiveness, - financial deepening, - the overall cost of doing business. ### Federal structure and coordination challenges - Three levels of government—federal, provincial, and municipal—can establish, regulate, and enforce taxes. - Major taxes (CIT, payroll, personal wealth, excises, and the VAT) are collected by the federal government and transferred to provinces according to a complex revenue-sharing formula (“coparticipación”). - Provinces receive around 60 percent of the total tax collection. - Trade and financial transactions taxes are set and collected by the federal government although these are not co-participated with the provinces. - Provinces collect mainly turnover, stamp, real estate taxes, with municipalities also charging additional taxes on activities and consumption. - Years of macroeconomic instability and limited fiscal discipline at all levels have aggravated the tax structure: - the federal government increased its reliance on distortive non-co-participated taxes, - provinces raised turnover taxes and other fees in the face of lower federal transfers and little incentives to curtail spending. ### Reform recommendations (revenue-neutral) - Gradually reduce distortive taxes on exports and financial transactions, replacing these with simpler and better administered direct taxes on households and corporates. - Harmonize the rate of monotributo and improve the transition of small taxpayers to the general tax system. - Substantially simplify the CIT, considering lower statutory rates and streamlining deductions and exemptions, and addressing profit transfer abuses. - Curtail tax expenditures, which are estimated at 3.5 percent of GDP and only benefit certain groups/regions. - At the provincial level: - Phase out distortive provincial taxes. - Improve the valuation of real estate and land assets (including of large agricultural producers), among others by strengthening existing asset registries. - Further study and coordinate the taxation of energy and mining resources, especially given incentives already in place under the RIGI regime. - At all levels: - Simplify the system by eliminating taxes that do not collect much. - Improve tax and customs administration through modernized information systems, better coordination, and adoption of risk-based compliance improvement plans. ### Accompanying fiscal and institutional reforms - The tax reform should be accompanied by a reform to the revenue-sharing system and fiscal responsibility frameworks. - This is necessary to better balance incentives for fiscal efficiency and discipline across levels of government. - The recommended approach is in line with the 2024 Pacto de Mayo agreement signed by most provincial governors. *Source: IMF staff (Box 7 text provided).* ### Annex I. External Sector Assessment ### Annex I. External Sector Assessment ### Overall assessment and policy responses - Overall Assessment: - On a preliminary basis, the external position in 2024 was weaker than the level implied by medium-term fundamentals and desirable policies. - Economic fundamentals improved substantially since end-2023. - Net international reserves remain critically low and sovereign spreads, while down sharply, are still elevated. - The external assessment (mainly based on data through end-2024) is subject to exceptionally high uncertainty and could evolve over time as structural reforms proceed. - Policy Responses (recommended/necessary): - Continued program implementation centered on a strong fiscal anchor, a tight monetary policy stance, a more sustainable FX regime, and structural reforms. - Move to a more flexible exchange rate, with gradual easing of remaining exchange controls. - Adopt a cautious approach to prudential policies and competitiveness reforms to build resilience and support sustainable longer-term capital inflows. - Leverage Argentina’s external potential in energy and mining through sustained FDI. ### Foreign asset and liability position and trajectory - Background: - Argentina’s NIIP turned from a negative US$60 billion in 1999 to a positive US$120 billion in 2020–23. - In 2024, the stabilization plan delivered: increase in reserve assets (US$6 billion), some decline in the public sector’s external debt (US$3 billion), and strong resident inflows (supported by a tax amnesty on undeclared FX assets). - Corporates have healthy balance sheets, limited leverage, started tapping international capital markets, and normalized trade credit liabilities; gross liabilities increased reflecting better valuations of direct and portfolio investments. - Assessment: - Vulnerabilities remain high: the large positive NIIP mostly reflects private sector holdings of external (low-yielding) assets, while the government’s foreign position remains in deep negative territory as of end-2024 and reserve levels remain low. - Key 2024 figures (% GDP): - NIIP: 10.6 - Gross Assets: 81.3 - Res. Assets: 3 - Gross Liab.: 70.1 - Ext. Debt.: 49.2 - Notes: - Statistical analysis over last 30 years suggests a US$1 increase in public sector’s IIP is associated with a US$0.6 decrease in private sector’s external assets. - Reflecting IIP vulnerabilities, Argentina’s primary income is about -2 percent of GDP despite positive NIIP. - Reserve assets exclude the inactivated portion of the bilateral swap with the PBoC (about 2 percent of GDP). ### Current account (CA) - Background: - CA reversed from a deficit of 3.4 percent of GDP in 2023 to a surplus of 1 percent of GDP in 2024. - Drivers: significant demand compression amid fiscal consolidation and exchange rate correction (at end-2023), recovery in grain exports (after drought), and improvement in the energy balance. - CA has narrowed since mid-2024 due to strong economic recovery, peso appreciation, and easing of many import taxes/restrictions. - Projected to reach a deficit of 0.4 percent in 2025. - Prudent policies and productivity/competitiveness reforms projected to support a small CA surplus over the medium term, with structural improvements in energy and mining important. - Assessment and key numeric estimates (2024, % GDP, est.): - CA: 1 - Cycl. Adj. CA: (–0.9; 0.1) - EBA Norm: 0.6 - EBA Gap: (–1.5; -0.5) - Staff Adj: (0; 0.5) - Staff Gap: (–2; -0.5) - Interpretation: - The cyclically adjusted CA was estimated to hover between -0.9 and 0.1 percent of GDP. - External sustainability considerations suggest a CA norm between 0.6 and 1.2 percent of GDP to bring reserves near 100 percent of the ARA metric over the medium-term while avoiding further increases in gross external liabilities. - IMF staff assesses the CA gap in 2024 to be in the range of (–2 and -0.5) percent of GDP, partly reflecting the need to strengthen fiscal position given projected increases in the interest bill. - The CA norm is somewhat lower than previous assessments, reflecting improved medium-term growth prospects and potential for greater FDI and resident asset repatriation. ### Real exchange rate (REER) - Background: - REER depreciated by more than 25 percent between end-2016 and end-2019; appreciated by over 30 percent over 2020–23 before the exchange rate correction in December 2023. - Since December 2023, the REER appreciated by over 40 percent through 2025 Q1, reflecting diminishing but still positive inflation differentials vis-à-vis trading partners under the crawling peg regime. - Price-based and wage-based REER indices show similar patterns; wage adjustments have lagged somewhat. - Assessment: - Staff-assessed CA gap implies a REER gap of between 15 and 25 percent relative to Q1:2025, broadly consistent with EBA REER models. - High uncertainty: wide confidence interval around the CA gap and large residuals. - A stronger exchange rate over the medium term could be justified if ambitious structural reforms boost productivity and competitiveness and attract sustained FDI to safeguard energy-balance improvements. ### Capital and financial accounts: flows and policy measures - Background — easing of FX restrictions since end-2023 (examples): - Period for accessing imports reduced to 30 days (from 90–180 days). - Elimination of the impuesto pais (distortionary FX access tax). - Easing of norms (“parking periods”) for accessing the parallel exchange rate. - Market-based solution to import and dividend payment backlogs implemented through BCRA FX denominated securities (BOPREALs). - Elimination of the preferential exchange rate for tourism inflows. - Implementation of a tax amnesty that encouraged resident inflows. - Critical current account and capital account restrictions remained in place during 2024 and early 2025. - Assessment: - CFMs supported stability but are not a substitute for sound macroeconomic policies. - Careful removal of CFMs, greater exchange rate flexibility, and tight prudential policies are necessary to boost reserves and regain sovereign market access. - Strong private sector balance sheets (low corporate indebtedness and a large positive private sector IIP) provide a solid foundation for continued capital inflows, but tight prudential policies are necessary to avoid currency mismatches. ### FX intervention and reserves level - Background: - Gross international reserves fell by over US$20bn in 2023, pushing NIR to negative US$11bn. - Stabilization plan raised NIR by US$6bn during 2024, but accumulation has been more challenging since mid-2024; NIR now at negative US$5bn. - Strong BCRA FX purchases in 2024: US$25bn through end-February 2025. - Offsets: large public FX debt obligations (US$17bn of Treasury and BCRA) and FX sales in parallel FX markets (US$2.5bn). - Assessment: - Reserve coverage remains highly inadequate. - Gross international reserves are estimated at about 23 percent of the IMF’s composite metric as of end-2024. ### Sovereign risk and debt sustainability: summary assessment - Overall DSA judgment: - Staff assesses Argentina’s debt as “sustainable, but not with high probability.” - Tools used: Debt Fanchart analysis, GFN Financeability module, crisis prediction model, contingent liability analysis, 10-year Debt Fanchart, and updated assessment of net federal government (Treasury) debt excluding intra-public sector obligations. - Key points and projections: - The assessment is predicated on successful implementation of the program addressing imbalances and structural challenges. - Gross public debt projected to fall from around 86 percent of GDP in 2024 to around 56 percent of GDP by 2030, conditional on strict fiscal discipline and growth-enhancing reforms. - The DSA assumes Fund resources will be used to strengthen BCRA reserve buffers; Fund disbursements may be used to buy back Treasury debt held at the BCRA (note that while gross Treasury debt may be unchanged, net Treasury debt and consolidated public sector debt rise by the amount of the disbursement). - Recent dynamics and stock measures: - Gross federal government (Treasury) debt increased to over 150 percent of GDP in 2023, then fell to 85 percent of GDP in 2024 due to exchange rate valuation effects and a sharp fiscal adjustment (over 5 percentage points of GDP). - The BCRA recapitalization cost was about 2.5 percent of GDP when short-term Treasury securities replaced BCRA short-term paper and the government assumed the interest cost. - Net Treasury debt fell to 51 percent of GDP by end-2024 (compared to 93 percent in 2023); roughly 20 percent of GDP of Treasury peso debt held by the private sector. - Net consolidated level (including BCRA debt net of Treasury deposits at BCRA) reached 52 percent of GDP at end-2024 (compared to 111 percent in 2023). - Consolidated peso debt fell from 35 percent of GDP in 2023 to around 19 percent of GDP in 2024. - Risk assessment and contingency: - Despite improvements, overall risks of sovereign stress remain high given exceptionally high economic uncertainty, still elevated inflation, low reserve levels, and risks around re-entry to international markets. - Medium-term risks are assessed as moderate but hinge critically on steadfast implementation of the stabilization plan. - Securing twin (fiscal and current account) surpluses will be essential to tackle debt vulnerabilities and rebuild external buffers. - Failure to adhere to the fiscal anchor would increase financing pressures and gross financing needs over the medium to long term. - Latent structural vulnerabilities: low and undiversified export base, thin domestic capital markets, high shares of foreign currency and non-resident debt, and contingent liabilities from potential deterioration in provincial finances. - Re-entry to international debt markets expected in 2026; risks of renewed sovereign stress over the longer term remain if program objectives are not fully met. - Table highlights (selected DSA numbers, as reported for 2023–26; percentages): - 1. Gross federal debt (DSA perimeter): 367.9 (2023), 478.7 (2024), 462.6 (2025), 458.2 (2026) — reflected as 155.4 (2023), 85.3 (2024), 73.1 (2025), 68.2 (2026) in adjacent presentation. - 2. Federal debt (excl. intra-public sector holdings): 220.0 (2023), 288.6 (2024), 279.7 (2025), 264.3 (2026) — reflected as 92.9 (2023), 51.4 (2024), 44.2 (2025), 39.4 (2026) in adjacent presentation. - 2a. FX debt: 173.8 (2023), 173.4 (2024), 186.6 (2025), 190.5 (2026) — reflected as 73.4 (2023), 30.9 (2024), 29.5 (2025), 28.4 (2026) in adjacent presentation. - IMF-related and official sector holdings shown among subcomponents; private sector FX liabilities and small holdings by holdouts and finalized litigation are also reported. - Staff recommendation: - Full adherence to program objectives, sustained fiscal anchor, transition to a more flexible exchange rate, gradual easing of FX restrictions, and structural reforms to deepen domestic capital markets and boost exports to mobilize domestic saving and strengthen reserves. - Contingency planning and agile policy-making are indispensable given exceptionally high risks. *Annex I. External Sector Assessment (source PDF content).* ### 3. Intra-public sector Treasury debt 2/147.9 190.1 182.9 193.862.533.928.9 28.9 ### 3. Intra-public sector Treasury debt ### Intra-public sector and related debt stocks (table figures) - 3. Intra-public sector Treasury debt: 2/147.9 190.1 182.9 193.8 62.5 33.9 28.9 28.9 ### BCRA liabilities (breakdown) - 4. BCRA liabilities: 3/43.5 12.3 11.7 9.7 18.4 2.2 1.8 1.4 - 4a. FX debt: 3/5.1 12.0 11.6 9.6 2.1 2.1 1.8 1.4 - 4b. LC debt: 38.4 0.3 0.1 0.0 16.2 0.0 0.0 0.0 ### Treasury deposits at the BCRA - 5. Treasury Deposits at the BCRA: 1.2 1.9 1.9 1.9 0.5 2.1 1.9 1.8 ### Net consolidated public sector debt (consolidation and local-currency subcomponent) - 6. Net consolidated public sector debt (6=2+4-5): 262.2 289.0 279.5 262.1 110.8 51.5 44.2 39.0 - 6b. Net consolidated LC debt (6b=2b+4b-5): 83.3 103.6 81.3 62.0 35.2 18.5 12.9 9.2 ### Notes on coverage and measurement - Sources: Argentine authorities and Fund staff estimates. - 3/ Includes BOPREAL, the PBoC swap line, and other small FX liabilities. - (in percent of GDP)(in US$ billion) - 1/ Debt based on data provided by the authorities and estimated using end-of-period exchange rates. Debt-to-GDP ratio is based on average period GDP. The debt stock is higher than the ones included in MEcon's monthly debt reports because they include i) capitalized interest payments until maturity, ii) holdouts, and iii) claims related to the finalized London litigation case on the GDP warrants. - 2/ Public sector includes the central bank (BCRA) and the social security fund (FGS). ### Contextual findings and policy implications (excerpts) - Baseline GFNs are projected to remain high and average around 13 percent of GDP over the 2025–30 period (around 9 percent of GDP for debt held by the private and official sector). - About 40 percent of peso debt has capitalized interest payments which are recorded below the line. In 2025, these are estimated at about 1.6 percent of GDP in nominal terms (excluding intra-public sector interest payments). - About 80 percent of issuances during Q2–Q4:2024 were in the form of fixed-rate instruments, reducing the share of inflation-linked instruments in domestic debt from around 80 to 60 percent between Q1 and Q4:2024. - Exposure of the domestic banking sector to the consolidated public sector (including the BCRA) fell to around 36 percent of all assets by end-2024, from over 50 percent at end-2023. - Key mitigation factors identified: - Treasury peso deposits at commercial banks and the BCRA (around ARS 17 trillion at end-2024). - Large share of debt held by other public sector entities (not subject to rollover risks). - Banking system’s ability to sustain large exposure to the consolidated public sector (in the context of strict capital controls). - A large share of FX debt held by IFIs at more favorable terms. ### Medium- and longer-term risks and recommended policy actions - Reducing refinancing vulnerabilities and securing timely re-access to international capital markets will require sustained fiscal efforts and agile debt management. - Meeting FX obligations given a small export base and high financial dollarization requires strengthening the balance of payments through improved competitiveness and reforms that encourage stable FDI, including leveraging Argentina’s energy and mining potential. - Move to a more sustainable exchange rate regime to limit overvaluation risks and safeguard external sustainability. - Maintain the non-bailout approach on provincial debts and resolve pending litigation cases; seek early agreement on repayment terms for the London judgement (EUR 1.6 billion is included in staff’s debt stock). - Agile policymaking and additional macroeconomic adjustments will be necessary if contingent liability risks materialize. ### SRDSF key macroeconomic and financing assumptions (selected figures) Macroeconomic assumptions: - Real GDP: contraction of about 1.7 percent in 2024; expected expansion by 5.5 percent in 2025; potential growth of about 3 percent over the medium term. - Inflation (eop): peaked at about 211 percent y/y in 2023; around 118 percent in 2024; projected to reach 18–23 percent by end-2025; annual inflation expected to reach single digits in 2027. - Primary fiscal surplus: 1.3 percent of GDP in 2025 (compared to 1.8 percent of GDP in 2024); projected steady-state primary surplus of 2.5 percent of GDP. - Gross international reserves: recover from around 24 percent of the ARA metric at end-2024 to around 100 percent by 2030. Financing assumptions (selected figures): - External official financing (excl. Fund): Gross disbursements in 2025: US$6.7 billion; large contributions from World Bank and IDB (around US$2.5 billion each). - External private sector financing: re-access to international markets from 2026 onward; initial spreads assumed between 400–500 basis points. - BCRA financing of the fiscal deficit: prohibited (direct or indirect). - Peso market financing instruments (assumed shares, percent): Short-term (fixed rate): 50 50 30 30 30 30; CER-linked: 50 40 40 20 20 20; Long-term (fixed rate): 0 10 30 50 50 50. - Real interest rate (percent): 4.0 4.0 4.0 4.7 5.0 5.4 5.6 (as presented across projection years). Key DSA financing assumption table (selected rows): - External Financing — Official (ex. IMF) Disbursements (USD billions): 6.7 5.0 5.0 5.0 5.0 5.0 - External Financing — Official (ex. IMF) Net financing (USD billions): 4.3 2.0 2.1 2.0 2.0 2.0 - Nominal interest rate (percent): 3.9 3.8 3.8 3.8 3.8 3.8 - International markets — Issuance (USD billions): 0.0 4.0 5.0 5.0 6.0 6.0 - Spread (basis points): 550 500 450 450 450 450 - Maturity (years): 7 7 7 7 7 7 - Grace period (years): 4 4 4 4 4 4 *Source: Argentine authorities and Fund staff estimates, as reported in the provided IMF chapter excerpt.* ### 5. Debt consolidation across sectors: ### 5. Debt consolidation across sectors: ### Coverage, recording, and key commentary - Coverage in this SRDSA is gross federal (central government) debt held by the private, official and public sectors. - Exclusions explicitly noted: - GDP warrants, debt of the provinces or municipalities, or debt of the central bank. - Excludes FGS/ANSES liabilities. - Excludes state govt liabilities. - Excludes local govt liabilities. - Staff view: exclusion of provincial debt is not judged a significant contingent liability risk, given the federal government's non-bailout approach to the recent provincial debt restructuring. - Central bank bilateral FX swaps were not included in public debt for DSA purposes because their amount is lower than the de-minimis threshold of 1 percent of GDP. - Basis of recording and valuation: references to nominal value, face value, market value, accrual vs cash basis, and other recording considerations are noted but not filled with additional numeric detail in this section. ### Debt composition and instrument/maturity characteristics (central government perimeter) - Foreign-currency denominated debt will continue to dominate over the long term. - Government debt management strategy since Q2:2024: - Focus on deindexing debt and extending maturity. - Issuances relying mainly on fixed rate instruments (over 80 percent) since Q2:2024. - Near-term assumptions: - Because annual inflation is still high and disinflation pace uncertain, some reliance on inflation-linked (CER-linked) debt instruments is assumed to persist over the near and medium term. - Mitigating factors for rollover risks: - Large share of FX debt held by IFIs. - Large share of overall debt held by the intra-public sectors (including non-marketable instruments). ### Forecast track record and realism of baseline assumptions - Staff assessment: baseline optimism exists, particularly regarding debt reduction and exchange rate paths; risks to the baseline remain exceptionally high. - Contextual notes: - Argentina experiences extreme economic volatility, complicating forecast accuracy. - Program baseline assumes a significant and sustained macroeconomic adjustment and fiscal consolidation. - Envisaged fiscal consolidation appears relatively optimistic but broadly in line with other successful stabilization episodes. - Bond issuance analysis is consistent with resumption of international market access from 2025 onwards, with modest initial issuances. - Projected medium-term growth is optimistic relative to the 10-year average but is tied to removal of economic distortions and implementation of growth-enhancing reforms. ### Baseline scenario key projections and statistics (Percent of GDP, unless indicated otherwise) - Public debt (actual and projections): - Actual 2024: 85.3 - 2025: 73.1 - 2026: 68.2 - 2027: 65.1 - 2028: 63.3 - 2029: 59.3 - 2030: 55.7 - 2031: 52.0 - 2032: 48.5 - 2033: 45.1 - 2034: 41.8 - 2035: 38.2 - Change in public debt: - 2024: -70.1 - 2025: -12.2 - 2026: -4.9 - 2027: -3.1 - 2028: -1.8 - 2029: -4.0 - 2030: -3.7 - 2031: -3.6 - 2032: -3.5 - 2033: -3.4 - 2034: -3.3 - 2035: -3.6 - Contribution of identified flows: - 2024: -26.3 - 2025: -13.8 - 2026: -7.4 - 2027: -5.8 - 2028: -4.6 - 2029: -4.5 - 2030: -4.2 - 2031: -4.1 - 2032: -4.0 - 2033: -3.9 - 2034: -3.8 - 2035: -3.8 - Primary deficit: - 2024: -1.8 - 2025: -1.3 - 2026: -2.2 - 2027: -2.5 (and maintained at -2.5 through 2034; 2035 shows -2.5) - Noninterest revenues and expenditures (selected years): - Noninterest revenues: 2024: 24.2; projected steady at 27.0 from 2029 onward. - Noninterest expenditures: 2024: 22.4; projected 24.5 from 2030 onward. - Automatic debt dynamics: - 2024: -24.5 - 2025: -12.5 - 2026: -5.2 - 2027: -3.3 - 2028: -2.1 - 2029: -2.0 - 2030: -1.7 - 2031: -1.6 - 2032: -1.5 - 2033: -1.4 - 2034: -1.3 - 2035: -1.3 - Real interest rate and relative inflation contributions: - Real interest rate and relative inflation: 2024: -30.8; 2025: -8.0; 2026: -2.0; 2027: -0.7; 2028 onward: 0.0 (through 2034) with 2035: -0.1 - Real interest rate: 2024: -104.2; 2025: -17.4; 2026: -6.3; 2027: -3.3; 2028: -2.0; 2029: -2.0; 2030: -1.8; 2031: -1.8; 2032: -1.6; 2033: -1.5; 2034: -1.4; 2035: -1.3 - Relative inflation: 2024: 73.4; 2025: 9.3; 2026: 4.3; 2027: 2.6; 2028: 2.0; 2029: 2.0; 2030: 1.9; 2031: 1.7; 2032: 1.6; 2033: 1.5; 2034: 1.4; 2035: 1.3 - Real GDP growth (noted with formatting issues in source but preserved where present): - Various entries include 2.7, -4.5, -3.2, -2.6, -2.0, -1.9, -1.7, -1.6, -1.5, -1.4, -1.3, -1.2 (as presented in the source table). - Gross financing needs and debt service (selected projections): - Gross financing needs (2024 actual): 19.6 - Gross financing needs (2025): 17.3 - Gross financing needs (2026): 12.1 - Debt service (percent of GDP, various years shown): 21.4 (2024), 18.6 (2025), 14.3 (2026), 16.8 (2027), 13.4 (2028), 16.6 (2029), 12.2 (2030), 15.5 (2031), 13.0 (2032), 13.8 (2033), 11.7 (2034), 11.5 (2035) - Local currency debt service and foreign currency shares are separately listed across years in the table. - Memo items: - Real GDP growth (percent): -1.7 (actual 2024) followed by 5.5, 4.5, 4.0, 3.2, 3.1, 3.0, 3.0, 3.0, 3.0, 3.0, 3.0 (projected sequence as shown). - Inflation (GDP deflator; percent): 206.3 (2024), 30.4 (2025), 14.5 (2026), 9.4 (2027), 7.5 (2028 onward repeated through 2035). - Nominal GDP growth (percent): 202.6 (2024), 37.3 (2025), 19.7 (2026), 13.7 (2027), 10.9 (2028 onward repeated at 10.9 through 2035). - Effective interest rate (percent): 3.4 (2024), 2.4 (2025), 4.1 (2026), 3.9 (2027), 4.0 (2028), 4.0 (2029), 4.1 (2030), 4.0 (2031), 4.0 (2032), 4.1 (2033), 4.2 (2034), 3.9 (2035). - Commentary highlights: - Public debt is projected to decline over the long term under assumptions of strong adherence to the fiscal anchor of a zero overall deficit. - Large residuals in 2024-25 reflect stock-flow adjustments given differences between end-of-period and period average exchange rates amid FX adjustments. - Reduction of the effective interest rate in 2025 reflects recent auctions placing debt at longer maturities and lower yields and placement of zero-coupon bonds. - Over time, effective interest rate is projected to increase with easing of FX controls. - Policy priorities noted: deepen domestic capital markets, boost exports and productivity, mobilize domestic saving, strengthen reserves, and improve prospects of international market re-access. ### Medium-term risk analysis and fan charts - Debt fanchart module: - Fanchart width (percent of GDP): 74.2 1.1 - Probability of debt non-stabilization (percent): 3.0 0.0 - Terminal debt-to-GDP x: 40.4 0.9 - Debt fanchart index (DFI): 2.0 - Risk signal: Moderate - Gross financing needs (GFN) module: - Average baseline GFN (percent of GDP): 13.1 4.5 - Initial Banks' claims on the general govt (pct bank assets): 30.1 9.8 - Change in banks' claims in stress (pct banks' assets): 9.1 3.1 - GFN financeability index (GFI): 17.3 - Risk signal: Moderate - Medium-term index and final assessment: - Medium-term risk assessment: Moderate - Final assessment metrics: - Prob. of missed crisis, 2025-2030, if stress not predicted: 27.3 pct. - Prob. of false alarms, 2025-2030, if stress predicted: 10.2 pct. - Commentary: Staff assesses medium-term risks as moderate given projected declining debt-to-GDP under adherence to the fiscal anchor and more stable macro conditions, but substantial uncertainty remains. ### Decomposition of public debt and debt service by creditor (2025–2026) - Aggregate (2025): - Total debt stock (end of period): 483.8 (In US$ bn); Percent total debt: 100.0; Percent GDP: 86.2 - External (2025): - External: 131.2 (In US$ bn); 27.1 percent total debt; 23.4 percent GDP - Multilateral creditors (sum and components, 2025): - Multilateral creditors: 75.4; 15.6 percent total debt; 13.4 percent GDP - IMF: 40.6; 8.4 percent total debt; 7.2 percent GDP - World Bank: 10.7; 2.2 percent total debt; 1.9 percent GDP - CAF: 4.8; 1.0 percent total debt; 0.8 percent GDP - IADB: 17.5; 3.6 percent total debt; 3.1 percent GDP - FONPLATA: 0.6; 0.1 percent total debt; 0.1 percent GDP - BIE: 0.2; 0.0 percent total debt; 0.0 percent GDP - BCIE: 0.8; 0.2 percent total debt; 0.1 percent GDP - Other Multilaterals: 0.2; 0.0 percent total debt; 0.0 percent GDP - OFID: 0.1; 0.0 percent total debt; 0.0 percent GDP - IFAD: 0.0; 0.0 percent total debt; 0.0 percent GDP - Bilateral Creditors (2025): - Bilateral Creditors: 3.6; 0.7 percent total debt; 0.6 percent GDP - Paris Club: 1.3; 0.3 percent total debt; 0.2 percent GDP - Non-Paris Club: 2.3; 0.5 percent total debt; 0.4 percent GDP - o/w: China: 2.1; 0.4 percent total debt; 0.4 percent GDP - External market instruments (2025): - T-Bills: 0.3; 0.1 percent total debt; 0.1 percent GDP - Bonds: 51.7; 10.7 percent total debt; 9.2 percent GDP - Commercial creditors: 0.3; 0.1 percent total debt; 0.0 percent GDP - Domestic (2025): - Domestic: 352.6; 72.9 percent total debt; 62.9 percent GDP - T-Bills: 138.1; 28.5 percent total debt; 24.6 percent GDP - Bonds: 206.5; 42.7 percent total debt; 36.8 percent GDP - Loans: 8.1; 1.7 percent total debt; 0.0 percent GDP - Notes on the table: - Debt stock basis: as reported by country authorities according to their classification of creditors; debt coverage is same as in the DSA except holdouts and litigations related to the London GDP warrant case (totalling about US$4 billion) included in DSA but not in this table. - External versus domestic classification based on residency definition. - Multilateral creditors are defined as institutions with more than one official shareholder and may not align with other IMF creditor classifications. ### Annex III — Foreign exchange regime as it applies to current international transactions (selected points) - Argentina maintains many restrictions on access to the official foreign exchange market (Mercado Unico y Libre de Cambios or “MULC”) for payments and transfers for current international transactions. - Most measures were in place at the time of approval of the Extended Arrangement for Argentina in March 2022; the Board granted approval to maintain them on a temporary basis. - Types of restrictions at that time included: - General restrictions on access to the FX market. - Restrictions on payments for imports, invisible transactions (transfers of dividends, profits, wages, remittances etc.), payments of interests and amortization of loans. - Multiple Currency Practices (MCPs) arising from exchange taxes (Impuesto Pais), withholding taxes on FX purchases, and the parallel market. - Over 2022 and 2023: - Reliance on exchange restrictions and MCPs intensified. - Many new restrictions and MCPs were introduced; existing measures were modified; FX market grew increasingly segmented. - Some measures (e.g., soy dollar and other incentive schemes) were short-lived; many intended to remain longer. - These measures were approved by the Executive Board as introduced primarily for balance of payments reasons and authorities committed to unwind them as market conditions improved. *Source: IMF staff estimates, projections, and commentary as presented in the chapter "5. Debt consolidation across sectors:" from the provided PDF content.* ### 3. Beginning in December 2023, Argentina started a gradual and significant process of ### 3. Beginning in December 2023, Argentina started a gradual and significant process of liberalizing the FX regime ### Liberalization measures and timeline - December 2023 onward: authorities streamlined and substantially shortened delayed FX access for imports, reduced withholding taxes, and allowed a number of FX controls and exchange taxes to lapse. - Key measures to ease exchange controls: - (i) a gradual reduction of FX access delays, resulting in an across-the-board waiting period not exceeding 30 days after arrival in Argentina for nearly all goods and services; some goods like fuel have no waiting period; 90 days for services imported from related entities. - (ii) removal of restrictions on making advance payment on capital goods and payment “at sight” (before the goods arrive in Argentina) with own dollars since December 2024. - (iii) allowing MSMEs to access FX from the MULC in advance for up to 20 percent of capital goods purchases. - (iv) extending the period for mandatory surrender of FX proceeds from five to 20 days for most goods, and from 15 to 30 days for some agricultural goods. - (v) further easing restrictions on BOPREAL transactions to make the new instruments more attractive. - (vi) streamlining the withholding taxes, resulting in one withholding tax of 30 percent. - (vii) repealing the preferential exchange rate for non-resident tourists which was assessed as giving rise to an MCP. - (viii) adjusting the level and scope of Impuesto Pais and ultimately letting it lapse, thereby eliminating many of the MCPs and exchange restrictions relating to exchange taxes. - (ix) allowing interest payment on intercompany debt accruing from January 1, 2025. - (x) aligning the delay to transition from the CCL and MEP for transaction of securities under foreign law to the one for securities under domestic law (90 days). ### BOPREAL and debt overhang resolution - Central bank issued FX-denominated instruments (BOPREAL) to unwind the large stock of importers’ debt overhang and dividend payments to non-residents. - For commercial debt accumulated before December 13, 2023: - Eligible importers with properly registered and verified debt could purchase BOPREAL securities, settled in pesos and payable in USD with maturities of up to 4 years at varying interest rates. - Importers could use BOPREAL for collateralized borrowing, sell in the secondary market, or as a payment promise. - BOPREAL timeline and uses: - BCRA extended eligibility to dividend backlogs with additional issuance in May 2024. - An additional tranche of BOPREAL was issued in January 2025 to provide collateral for a repurchase operation. - BOPREAL can also be used for payment of tax obligations at a specified exchange rate and to settle dividend payments to non-resident investors. ### Exchange restrictions remaining at time of staff report - Staff summarizes measures giving rise to exchange restrictions under broad headings: - a. General Restriction: limitations on access to the foreign exchange market for current international transactions, preventing access to the official foreign exchange market (MULC) unless the requester has not in the previous and subsequent 90 days undertaken certain transactions in the securities market (CCL). - b. Restrictions on Payments for Imports: - (i) delayed access to and limitations on the amounts of FX that can be accessed for import payments. There is currently a 30-day delay to obtain FX for import of goods. - (ii) limitations on advance payments for imports. - (iii) limitations on payments for imports of luxury goods. - (iv) a preauthorization requirement for payments of services to related parties. - (v) a prohibition on accessing FX market for making payments for imports of soybeans until the export proceeds for the soybean product have been received. - c. Invisible Transactions: - (i) limitations on accessing the FX market to make transfers of foreign currency abroad as profits and dividends to non-resident shareholders. - (ii) limitations on access to FX by resident individuals for invisible transactions (e.g., savings, wages, salaries, family remittances, medical expenses, educational expenses) and other current account transfers and for non-residents for transferring abroad proceeds from current international transactions. - d. Restrictions on payments of interest and amortization on external loans: - (i) limitations on access to foreign exchange for payment of external indebtedness which require that all external debt proceeds have been surrendered into the local exchange market prior to accessing foreign exchange to service external debt. - (ii) mandatory refinancing requirements. - (iii) limitations on advance payments of debt. - (iv) prior BCRA consent for payments of principal (including amortization) to related parties. - (v) BCRA authorization requirement for FX market access for payments of interests to non-resident related counterparty. - e. Pension Restrictions: - Restriction of individuals who participate in the pension buyback scheme from accessing the FX market for a period of twelve months. - Restrictions of individuals who have debt with the National Security Administration (ANSES) from accessing the FX market. - Restrictions on beneficiaries of and contributors to the Argentine Integrated Pension System (SIPA) who receive financing provided under the ANSES credit scheme from accessing the FX market for as long as the loan remains unpaid. - April 2024: central bank introduced resolution A7994 providing an exemption for exporters to access the official foreign exchange market to settle external debt (both capital and interest) given if certain criteria are met, including that the settlement is made with newly borrowed funds from a domestic financial institution via foreign credit line. ### Multiple Currency Practice (MCP) and withholding tax - Argentina maintains an MCP arising from the 30 percent withholding exchange tax on the purchase of foreign exchange by individuals for: - (i) travel allowance (and savings), - (ii) the importation of a list of luxury goods, - (iii) the payment of certain professional services (including digital services). - Under current MCP policy, an MCP arises where an official action results in an actual exchange rate spread that differs unreasonably from the normal commercial costs and risks of exchange transactions (exchange rate spreads which are not considered “commercially reasonable”), i.e., exceed the permissible margins specified in the MCP policy. - The Fund determined that the previous finding of an MCP arising from the spread relative to the parallel (blue) market does not meet the requirement of the current policy because parallel (blue) market transactions are illegal; the spread relative to that market (the Blue Market) would not give rise to an MCP. ### Fund decision and temporary retention - On June 13, the Executive Board granted approval to retain the MCPs and exchange restrictions then in place on a temporary basis. - The Board approved that Argentina may maintain these exchange restrictions and MCPs for a period of 12 months beginning June 13, 2024, or the date of the completion of the next Article IV consultation with Argentina. ### Costs, benefits, and macro context cited in the report - Costs of MCP and exchange controls: - FX restrictions create substantial distortions, operational costs, and policy uncertainty that can discourage investment. - Benefits and rationale cited by authorities: - FX restrictions are focused on impeding outflows, thereby reducing balance of payment needs. - Proceeds of the withholding tax yield fiscal revenues that contribute to the fiscal surplus and in turn to the reduction in sovereign risk, further easing BOP pressures. ### Letter of Intent and program request (April 6, 2025) - Authorities describe stabilization and reform achievements since taking office on December 10, 2023, including: - Avoiding a full-blown balance of payments crisis. - Delivering the first overall fiscal surplus in almost two decades. - Normalizing regulated utility prices rapidly. - Bringing inflation under control by eliminating central bank's interest-bearing liabilities and accumulating the largest annual purchase of reserves from the private sector in decades. - Honoring financial obligations, shoring up record-level commercial and bilateral arrears, and procuring broad financial support. - Macro figures cited in context of the crisis before reforms: - net international reserves (NIR) fell to negative US$11 billion. - exchange rate gaps (over 150 percent). - sovereign spreads (over 2500bps). - importers’ debt reached $50 billion as of December 2023. - Request for IMF financing: - Requesting a new Extended Arrangement under the Extended Fund Facility for a period of 48 months, in the amount of SDR 15.267 billion (equivalent to around US$20 billion, or 479 percent of Argentina’s quota), with an initial disbursement of SDR 9.160 billion (equivalent to US$12 billion) upon program approval. - Followed by a first review in June 2025 and a second review by end-2025, with disbursements of SDR1.529 billion (US$2 billion) and SDR0.763 billion (US$1 billion), respectively. - Program monitoring via regular reviews, quantitative performance criteria, indicative targets, and structural benchmarks. - Authorities requested Executive Board approval of exchange restrictions and one MCP under Article VIII on grounds that these measures have been imposed for balance of payments reasons, are temporary, non-discriminatory in nature, and do not give Argentina unfair competitive advantage over other members. These measures will be phased out during the period of the arrangement. - Administrative and legal notes: - Emergency and Necessity Decree (Nº 179/2025) authorizing the Executive to seek this financing under a new IMF-supported program; decree was ratified by the Lower House. *Source: 1argea2025002-print-pdf* ### 4. We are now ready to transition to the next phase of our stabilization and growth plan, ### 4. We are now ready to transition to the next phase of our stabilization and growth plan ### Program request and intent - The authorities formally request a new four-year Extended Arrangement under the Extended Fund Facility (EFF) for an amount of SDR 15.267 billion (equivalent to US$20 billion, or 479 percent of the quota). - An upfront disbursement for SDR 9.160 billion (US$12 billion) is requested to be made available upon program approval. - Follow-on disbursements and review schedule: - First review in June 2025 with a disbursement of SDR1.529 billion (US$2 billion). - Second review in late-2025 with a disbursement of SDR0.763 billion (US$1 billion). - Intended uses and expected effects of the program: - IMF resources would be used to buy back Letras Intransferibles from the BCRA, reducing the Treasury’s gross indebtedness and improving the central bank’s balance sheet. - Boost international reserves and catalyze financing from other official creditors. - Support re-access to international capital markets at more favorable terms as policy implementation continues. - Policy direction: transition to a more flexible exchange rate framework, rebuild reserves, ultimately lift all FX restrictions, and deepen supply-side reforms to boost growth and export potential. ### Recent developments and performance (summarized) - Output and recovery: - After a sharp contraction during H1:2024, real GDP started to expand; high frequency indicators suggest a V-shape recovery driven by the private sector without fiscal impulse. - Economy operating well above November 2023 levels. - Disinflation: - Monthly headline inflation fell from over 25 percent in December 2023 to 2.4 percent in February 2025. - Goods and wholesale inflation trending below 2 percent m/m. - Some regulated prices rose by as much as 500 percent y/y during the correction of relative price misalignments. - Inflation expectations improved due to commitment to overall fiscal balance, elimination of monetary expansion sources, and strengthening of the central bank’s balance sheet. - Fiscal adjustment: - Fiscal deficit eradicated after an adjustment of about 5 percentage points of GDP from the beginning of 2024. - Real expenditures cuts of roughly 30 percent y/y; real revenues down 5 percent. - Temporary emergency revenues (tax amnesty/moratorium, wealth tax advance, and impuesto pais) helped preserve spending in key areas. - Prioritized social assistance, homeland and borders security; sharply cut national administration size, untargeted subsidies, wasteful provincial transfers, and lower-priority infrastructure. - Doubled in real terms benefits of flagship conditional cash-transfer programs for young mothers and children; eliminated costly social assistance intermediaries; closed 21 out of 31 extra-budgetary trust funds. - FX access tax on imports (impuesto pais) reduced in September 2024 and fully eliminated in December 2024. - Cumulative primary surplus of 0.5 percent of GDP delivered through February 2025. - Debt management and Treasury actions: - New peso issuances and voluntary debt exchanges prioritized fixed-rate and longer maturity instruments; share of inflation- and dollar-linked instruments fell from about 90 to 60 percent during 2024. - Average maturity of fixed rate instruments now about 9 months, compared to 3 months in late 2023. - Treasury paid private FX bondholders in January (US$4.3 billion) and accumulated FX deposits to cover a large share of the July payment (US$4.3 billion). - Net flows from other IFIs were neutral in 2024, with refinancing commitments from key bilateral creditors. - BCRA balance sheet, monetary policy, and financial intermediation: - Fiscal surplus and active debt management supported FX purchases and enabled government buybacks of securities, replacement of BCRA peso remunerated securities with Treasury liabilities, and elimination of most risky put options. - BCRA maintained a cap on broad-based money aggregates, operationalized an interest rate corridor (reverse repo rate) and created an active repo window. - Rationalized reserve requirement system (phasing out implicit rate subsidies and increasing cash reserves) and elimination of interest rate limits. - Real bank credit to the private sector growing at an average monthly rate of 7 percent since May (from a low base), and reduced bank exposure to the public sector. - BCRA completed in January a US$1 billion repo operation with international investment banks. - External position and reserves: - Accrual goods and services trade balance shifted from a cumulative deficit of US$9 billion in 2023 to a cumulative surplus of US$17 billion in 2024. - Policy-induced import compression, a step devaluation in December 2023, expansion in agricultural exports after the 2023 drought, and improvements in the energy balance contributed. - Tax amnesty yielded through November 2024 about US$32 billion in declared assets from Argentine residents. - BCRA purchased more than US$20 billion in reserves during 2024, enabling payment of Treasury FX debt obligations (over US$12 billion) and accumulation of about US$10 billion in net international reserves (NIR) relative to mid-December 2023. - NIR weakened somewhat since end-2024 as BCRA made strong FX purchases in January and February to meet external debt service obligations. - Structural and institutional reforms: - Deregulation, easing trade and investment barriers, and state modernization implemented from day one. - Competition increased in rental markets, air and land travel, and over-the-counter medicines. - FX restrictions eased, distortive import taxes eliminated, new systems for prompt and transparent FX access for most current account transactions. - Large investment regime (RIGI) attracted investment bids of roughly US$12.5 billion. - Number of ministries halved from 18 to 8; closed loss-making SOEs; reduced civil servant headcount by 11 percent in 2024. ### Objectives, outlook, and risks - Objectives: - Strengthen sustainability of fiscal effort through reforms that streamline spending while reducing the tax burden as conditions permit. - Rebuild reserves, regain market access, manage rising global risks with enhancements to FX and monetary regime and sequenced easing of FX restrictions. - Continue growth- and employment-enhancing reforms. - Macroeconomic projections: - Real GDP growth: - Expected to expand by 5.5 percent in 2025 (after contracting by around 1.7 percent in 2024). - Projected to expand by about 4.5 percent in 2026, before converging to trend. - Sustained policy implementation could push Argentina’s real per capita GDP growth above 4 percent (as argued by Martinez and Nicolini 2024). - Inflation: - Projected to fall to 20 percent y/y by end-2025, with ranges reflecting uncertainties around recovery in peso demand. - Projected to converge close to single digits by late 2026. - Disinflation underpinned by tight fiscal and monetary policies and a stronger BCRA balance sheet. - External current account: - Projected to remain broadly balanced in 2025, moving from a surplus of about 1 percent of GDP in 2024 to a small deficit of 0.4 percent in 2025. - Projected deficit of -0.3 percent of GDP in 2026. - Net international reserves (NIR): - Change in NIR projected: 2024: 4.9; 2025: 4.0; 2026: 8.0 (US$bn) as defined in the TMU, excluding changes in net Fund credit starting in 2025. - Table of selected indicators (as presented) - GDP growth (avg, %): 2024: -1.7; 2025: 5.5; 2026: 4.5 - Non-agro GDP: 2024: -3.1; 2025: 5.8; 2026: 4.7 - Inflation (eop, %): 2024: 117.8; 2025: [18-23]; 2026: [10-15] - Overall fiscal balance (% GDP): 2024: 0.3; 2025: 0.0; 2026: 0.0 - Current account balance (% GDP): 2024: 1.0; 2025: -0.4; 2026: -0.3 - Change in net int’l reserves (US$bn) 1/: 2024: 4.9; 2025: 4.0; 2026: 8.0 - Risks: - Elevated, mainly due to a more difficult external environment (rising global trade tensions, tighter global financial conditions, lower commodity prices, weaker outlook for trading partners). - Probability of weather-related shocks and uncertainties ahead of the October mid-term elections. - Upside risks: sustained program implementation could deliver faster and stronger access to international capital markets; market reforms could lead to earlier and stronger productivity improvements. - Policy response if shocks materialize: - Ready to aggressively tighten fiscal and monetary policies and other adjustments. - Revenue shortfalls to be offset by expenditure cuts; revenue overperformance to be saved or used to reduce the most distortive taxes. - Opposition to any new spending initiative that risks the fiscal anchor; consideration of early rationalization of tax expenditures and strengthening excise design if necessary. ### Fiscal policy and structural reforms - Fiscal policy stance: - Commitment to maintain a target of an overall fiscal balance in the years ahead. - For 2025, the target should result in a primary balance surplus of 1.3 percent of GDP (but could be stronger if interest expenditures end up higher than projected). - Measures to ensure adequate absorption to sustain disinflation. - Continued strict spending: further reduction in untargeted subsidies, improvements in state efficiency, and reprioritization toward social assistance, pensions, and priority infrastructure. - Higher-than-projected revenues will generally be saved; consideration to reduce the most distortive taxes if windfalls prove permanent. - Present to Congress in September a draft 2026 budget law (end-September 2025, SB) consistent with zero-overall budget deficit rule. - Fiscal structural reform program (timelines indicated as SB where applicable): - Tax policy and administration: - Develop and, at an appropriate stage, share with Fund staff a comprehensive revenue-neutral tax reform proposal that simplifies the tax system by drastically reducing the number of taxes (end-December 2025, SB). - Harmonization of VAT rates and across-the-board rationalization of costly tax expenditures; space to phase out distortive trade and financial transactions taxes. - Continue restructuring revenue administration and strengthen compliance risk management with technical support from development partners. - Revenue sharing and fiscal frameworks: - Engage provinces and municipalities to reduce reliance on distortive taxes and streamline operations. - Consider reforming the revenue sharing system and enhancing fiscal discipline incentives for subnational governments; first step to enhance fiscal reporting of provinces. - Spending quality and efficiency: - Continue aligning tariffs with cost recovery for higher income households and commercial users; consider simplifying energy subsidy scheme for lower income users. - Regulate and start the normalization of the wholesale electricity market (Mercado Electrico Mayorista MEM) by end-November 2025 (end-November 2025, SB). - Prepare comprehensive revision of the pension system to improve equity and sustainability; expected to be presented to Congress next year (end-December 2026, SB). - Public financial management reforms: - Continue to close all but one of the extra-budgetary trust funds (end-December 2025, SB). - Develop a plan to eliminate inefficient extra-budgetary entities to enhance governance (end-September 2025, SB). - Strengthen institutional capacity to ensure transparent privatization of SOEs included in Law number 27.742, and publish a report of such SOEs alongside a roadmap for privatization and concessions (mid-November 2025, SB). - Improve targeting and efficiency of social programs by harmonizing administrative databases into a single social registry (Sistema de Indicadores Sociales, SIS) (end-December 2025, SB). - Enhance cash management by expanding coverage of the integrated system of financial information (Sistema Integrado de Información Financiera, e-SIDIF) to include other government bodies and agencies (end-December 2025, SB). - Fiscal frameworks: - Publish a medium-term fiscal framework with detailed fiscal risk analysis and adverse scenarios in tandem with the draft 2026 budget (end-September 2025, SBs). - Publish a plan to revamp Fiscal Responsibility Legislation to enshrine the zero-deficit fiscal rule into law (end-December 2026, SBs). *Source: Argentina authorities’ program request and staff report (text provided).* ### 17. Our domestic debt management strategy will continue to prioritize enhancing the debt ### Our domestic debt management strategy will continue to prioritize enhancing the debt outlook. ### Domestic debt management and peso market development - Building on the de-indexation and maturity extension that took place in 2024, and a series of successful voluntary debt exchanges, authorities will seek to further strengthen the peso debt market and enhance the domestic debt profile and outlook. - Policy focus: - Build a yield curve with benchmark bonds to support secondary market liquidity and price discovery, with sufficient buffers to strengthen confidence. - Consider outlining the domestic financing strategy, including the expected composition of financing by creditor and instrument. ### FX financing strategy and international market access - Objectives and commitments: - Re-access international markets in a timely manner to smooth obligations over the medium term. - Continue fulfilling obligations to private bondholders, while keeping overall FX-denominated debt unchanged, consistent with the zero-deficit rule. - Sustained implementation of the plan, including enhancements in monetary and FX policies, is expected to reduce sovereign spreads and allow regained market access at more reasonable rates to refinance foreign-currency-denominated debt. - These efforts aim to support debt sustainability and permit an eventual reduction in Fund exposure as conditions permit. - Continued engagement with claimants regarding pending international litigation cases. - Key projected official financing flows: - Net financing after interest payments from multilateral and regional development banks are projected to reach at least US$2 billion during 2025. - Engagement with PBOC regarding the activated portion of the swap falling due during 2025-26 (about US$5 billion). - Work advanced toward renewing financing of the hydro-dam project; final financing assurances to be sought ahead of IMF Board consideration. ### Monetary and exchange rate policies - Exchange rate flexibility and FX restrictions: - Gradual transition towards greater exchange rate flexibility and easing of FX restrictions is a key element of the next phase of the stabilization plan. - As conditions permit, plan to move to a fully flexible exchange rate regime where the peso and US dollar coexist, consistent with Argentina’s bi-monetary economy. - Measures to foster currency competition include allowing businesses to publish prices and receive payments in US dollars. - Monetary policy framework and limits: - Monetary policy will remain tight to support stability and disinflation. - The current ARS 47.7 trillion broad monetary base ceiling will be replaced by a conventional monetary aggregate framework. - An indicative ceiling on central bank net domestic assets (NDA) will be established as the nominal anchor for inflation. - Commitment to zero monetary financing of (a) any Treasury deficit or (b) interest payments due on BCRA liabilities remains in place. - Should money demand prove weaker than anticipated, NDA would adjust accordingly, in coordination with the Treasury. - Reserve and prudential stance: - Continued prudent reserve requirements regime and commitment to rebuild net international reserves (performance criterion). ### Credit expansion and financial sector policies - Private credit expansion: - Efforts to facilitate responsible expansion of private credit; private credit remains very low at under 6.9 percent of GDP. - BCRA will rationalize the reserve requirement regime to improve monetary transmission and encourage private credit. - As bank deposits grow, private sector credit is expected to expand along with a relative decline in public sector’s exposure. - Financial regulation and macroprudential policy: - Credit quality will need close monitoring; bank regulations to be gradually aligned with Basel III standards on risk-based supervision. - Macroprudential policies will continue to ensure FX mismatches are contained—FX lending with FX deposits are limited to exporters. - Regulatory framework will evolve to consider fast-growing nonbank financial institutions (NBFIs) and Fintech. - Continued enhancement of institutional capacities to guard against cyber and cross-border money laundering risks (see ¶25). ### Structural policies and governance reforms - Growth, investment, and competitiveness: - Continued deregulation and reduction of entry barriers to improve resource allocation, promote competition, and enhance consumer welfare. - Emphasis on transparent and evenhanded implementation of the large investment regime (RIGI) to mobilize committed and new investments in energy, mining, agroindustry, and knowledge services. - Build on 2024 labor regulation reforms to encourage adherence to the new framework and boost formal employment. - Gradual phase-out of tariff and non-tariff trade barriers and other reforms (including tax system) to facilitate reallocation toward more competitive sectors. - Reducing state footprint and SOE governance: - Deeper efforts to rationalize redundant public employment and services, eliminate preferential treatment of public entities, and enhance SOE efficiency and governance. - Plans to improve capacity of federal workers and align compensation across government bodies, including centralization of payroll decisions and human resources management. ### Governance, transparency, and AML/CFT - Governance and transparency: - Strengthen anticorruption frameworks (including by updating the Public Ethics Law) and the efficiency and transparency of public procurement processes, particularly for large investment projects. - Strengthen competition and anti-trust agencies to secure level playing field for firms, including vis-à-vis public subnational entities. - Consider reform to the Public Ethics Law (originally enacted in 1999) to address contemporary legal and institutional challenges and align with international conventions. - Anti Money Laundering and Combating the Financing of Terrorism: - Strengthen AML/CFT frameworks, implement key FATF recommendations with close collaboration with the Fund and other experts. - Publish a Fund TA report on implementation of several FATF recommendations, with early priority on mitigating cross-border money laundering risks, emphasizing strategic analysis, monitoring and mitigation of cross-border ML/TF risk, and including risk-based exemptions to enhance public sector efficiency (end-November 2025, SB). ### Key quantitative targets, program exchange rates, and selected table entries - Selected program and target figures as presented: - Net financing after interest payments from multilateral and regional development banks projected to reach at least US$2 billion during 2025. - PBOC swap activated portion falling due during 2025-26: about US$5 billion. - ARS broad monetary base ceiling: ARS 47.7 trillion. - Private credit: under 6.9 percent of GDP. - Excerpts from Table 1 (as presented): - "1. Cumulative floor on the federal government primary balance 3/3,643.76,070.0...9,300.010,519.94,200.0" - "2. Ceiling on the federal government stock of domestic arrears 4/6,360.66,360.6...6,360.66,360.67,615.7" - "3. Non-accumulation of external debt payments arrears by the federal government 0.00.00.00.00.00.0" - "4. Floor on the coverage of social assistance programs (AUH, Tarjeta Alimentar) (percent of basic consumption basket)95.095.095.095.095.095.0" - "5. Cumulative floor on the change in net international reserves of BCRA 5/ 6/-4.9...-0.5-0.64.02.5" - "6. Cumulative ceiling on net central bank financing of the federal government 7/......0.00.00.00.0" - "7. Ceiling on the Change in the BCRA’s Net Domestic Assets 8/5,826.0...8,954.114,297.714,781.420,223.4" - Program exchange rates (rates published by the BCRA as of Jan 31, 2025): - Argentine Pesos to the US dollar 1,053.50 - Argentine Pesos to the SDR 1,373.58 - Argentine Pesos to the Euro 1,097.43 - Argentine Pesos to the Canadian dollar 731.24 - Argentine Pesos to the British pound 1,311.71 - Argentine Pesos to the Renminbi 145.42 - Gold price (US$/ounce) 2,808.08 ### Selected structural benchmarks and completion dates - Structural prior actions and benchmarks (selected entries and completion dates as presented): - Publication of a press release by the BCRA clarifying the new monetary and FX regime, consistent with the introduction of an exchange rate band. (Monetary / FX policy) - Publication of BCRA resolutions easing current account and capital account restrictions. (Monetary/FX Policy) - Issuance of an Emergency and Necessity Decree (DNU) eliminating the export incentive scheme (80/20). (Monetary/FX Policy) - Proposed structural benchmarks with completion dates: - Publish a report of the SOEs included in Law number 27.742, alongside a roadmap for their privatization and concessions, prepared by the SOE Transformation Agency. (Fiscal/Structural) mid-November 2025 - Publish guidelines needed to ensure an efficient and transparent privatization process of SOEs included in Law number 27.742. (Fiscal/Structural) mid-November 2025 - Submit to Congress the draft 2026 budget, consistent with the zero-overall budget deficit rule; the draft will contain a medium-term fiscal framework, including a detailed fiscal risk statement and adverse scenarios. (Fiscal/Structural) end-September 2025 - Eliminate all fiduciary funds (with the exception of the fiduciary fund for residential gas subsidies). (Fiscal/Structural) end-December, 2025 - Implement resolution 21/2025 to deregulate the wholesale electricity market (Mercado Electrico Mayorista MEM). (Fiscal/Structural) end-November 2025 - Publish Fund TA report on the implementation of several of the key FATF recommendations, with early priority on monitoring and strategic analysis measures to address cross-border ML risks and the implementation of risk-based exemptions to enhance public sector efficiency. (Financial/Governance) end-November 2025 - Complete the integration of relevant administrative databases into a single social registry (Sistema de Indicadores Sociales, SIS), working with World Bank technical assistance, to improve the targeting and efficiency of social support. (Fiscal/Structural) end-December 2025 - Develop (and share with Fund staff) a proposal to enhance the efficiency and simplicity of the tax system, envisaging the rationalization of costly tax expenditures to provide space to gradually phase out distortive trade and financial transactions taxes. (Fiscal/Structural) end-December 2025 - Implement the expansion in the coverage of the integrated system of financial information (Sistema Integrado de Información Financiera, e-SIDIF), working with the IDB, to include other government bodies and agencies announced in decree 1093/2024. (Fiscal/Structural) end-December, 2025 - Present to Congress a diagnostic and revision option report to the pension system aimed at improving its equity and sustainability. (Fiscal/Structural) end-December, 2026 - Present a plan to revamp the Fiscal Responsibility Legislation. (Fiscal/Structural) end-December, 2026 *Source: Excerpts from the IMF program documentation and Technical Memorandum of Understanding (TMU) contained in the provided content unit.* ### 6. Measurement: The Federal government’s primary balance will be measured at each test date ### 1argea2025002-print-pdf - 6. Measurement: The Federal government’s primary balance will be measured at each test date ### Measurement and monitoring of the Federal government’s primary balance - Measurement: The Federal government’s primary balance will be measured at each test date as the cumulative value starting from the beginning of each calendar year. - Monitoring: All fiscal data referred to above and needed for program monitoring purposes will be provided to the Fund with a lag of no more than 25 calendar days after the end of each month. ### Ceiling on Federal Government Accumulation of Domestic Arrears - Definition: - Domestic arrears are defined as the floating debt, that is the difference between primary spending recorded on an accrual basis (gasto devengado, from the SIDIF system) and primary spending recorded on a cash basis (base caja, from the Treasury). - Includes intra-public transfers (transferencias figurativas), and primary spending for personnel (gasto en personal), acquisition of goods and services (bienes y servicios), nonprofessional services (servicios no profesionales), capital expenditures (gastos de capital), and transfers (transferencias). - Measurement: - The arrears are measured on a daily basis. - Arrears will be capped at about 0.8 percent of GDP (ARS 6,360.6 million) for the daily average of the final two weeks of each quarter. - Monitoring: - Daily data on the stock of arrears (and underlying spending on an accrual and cash basis), recorded at daily frequency will be provided to the Fund with a lag of no more than 25 calendar days after the end of each month. ### Cumulative Floor on the Change in Net International Reserves (NIR) of the BCRA - Definitions: - Net international reserves (NIR) of the BCRA are equal to the balance of payments concept of NIR defined as the U.S. dollar value of gross official reserves of the BCRA minus gross official reserve liabilities. Non-U.S. dollar denominated foreign assets and liabilities will be converted into U.S. dollar at the program exchange rates. - Gross official reserve assets: defined consistently with BPM6 as readily available claims on nonresidents denominated in foreign convertible currencies and include BCRA’s (i) monetary claims, (ii) free gold, (iii) holdings of SDRs, (iv) the reserve position in the IMF, (v) holdings of fixed income instruments and (vi) net cash balances within the Latin American Trade Clearing System (ALADI). Excluded are assets pledged, collateralized, or otherwise encumbered, claims on residents, claims in foreign exchange arising from derivatives vis-à-vis domestic currency, precious metals other than gold, assets in nonconvertible currencies and illiquid assets. - Gross official reserve liabilities in foreign currencies include (i) foreign currency liabilities with original maturity of one year or less, (ii) Fund cumulative net purchases from the start date of the program onwards, (iii) any deliverable forward foreign exchange (FX) liabilities with original maturity of one year or less on a net basis defined as the long position minus the short position payable in foreign currencies directly undertaken by the BCRA or by any other financial institutions on behalf of the BCRA. The foreign currency swap with the People’s Bank of China, the foreign exchange bank reserve requirements, SEDESA, ALADI and other non-resident deposits would be considered, for program purposes, as gross official reserve liabilities. - Measurement: - The change in net international reserves will be measured as the cumulative change in the stock of NIR at each test date relative to the stock on December 31, 2024. - Monitoring: - Foreign exchange asset and liability data at the BCRA will be provided to the Fund at daily frequency within two days. - Net international reserves will be provided to the Fund at weekly frequency within two days. - Adjustors: - Official non-project borrowing and grants: The NIR targets will be adjusted upward (downward) by the surplus (shortfall) in program loan disbursements and grants from multilateral institutions (including the BCIE, EIB, IBRD, IADB and CAF) and borrowing and grants from official bilateral partners, relative to the baseline projection reported in Text Table 2. The value of the downward adjustor would be capped at a cumulative of US$4 billion in each calendar year. Program loan disbursements are defined as external loan disbursements (excluding project financing disbursements and IMF disbursements) from official creditors for the financing of the general government and/or the BCRA. - FX debt issuance: The NIR targets for calendar year 2025 will be adjusted upward by the amount of gross external borrowing by the Federal Government and by the BCRA from private creditors in foreign currency from the start date of the program until end-2025. The value of the upward adjustor would be capped at a cumulative of US$1,500 million. ### Cumulative Ceiling on the BCRA’s Net Financing of the Federal Government - Definitions: - Central bank (BCRA) financing to the government includes (i) overdraft transfers from the BCRA to the Federal Government (Adelantos Transitorios), (ii) distribution of profits (Utilidades), (iii) the acquisition of government debt in the primary market or by direct purchases from public institutions, (iv) issuance of new non-marketable government bonds (Letras Intransferibles), and (v) purchase of government securities in the secondary markets (including transactions bilateral, conducted at MAE and BYMA, or made at other parties’ discretion from application of regulation A7291 and the issuance of “put options” on government securities (under A7555 and A7716). - Net financing of the Federal Government is defined as the amount of financing to the government net of increases of peso deposits at the BCRA, of cash transfers from the Federal Government to the BCRA to repurchase government securities, reduce the stock of overdraft transfers or the stock of non-marketable government bonds or recapitalize the BCRA. - Transactions in the context of debt exchanges or rollover of non-marketable government bonds and transactions with government instruments used to conduct monetary policy, including the LeFi (Letras Fiscales de Liquidez), are excluded from this definition. - Distribution of profits (millions of US$) — cumulative from January 1, 2025: - end-March 2025: 2,387 - end-June 2025: 3,061 - end-September 2025: 4,726 - end-December 2025: 5,173 - Measurement: - The cap of cumulative flows on net financing since the start of the program is set to zero. - Clarification: - Any decrease in the stock of Adelantos shall only reflect cash payments of this amount by the Treasury to the BCRA. Transfer of Letras Intransferibles to the BCRA will not reduce the stock of Adelantos. - Monitoring: - Daily data will be provided to the Fund within two days. - The flow of BCRA net financing to the government will be measured at each test date as the cumulative value starting from program start date. - Secondary market purchases will be measured up to the end of the month prior to the target date given unpredictability and time needed to offset them. ### Federal Government Non-Accumulation of External Debt Payments Arrears - Definitions: - Debt: a current, i.e., not contingent liability, created under a contractual arrangement through the provision of value in the form of assets (including currency) or services and which requires the obligor to make one or more payments in the form of assets (including currency) or services, at some future point(s) in time. Debts take the following primary forms: - loans (including deposits, bonds, debentures, commercial loans and buyers’ credits) and temporary exchanges of assets equivalent to fully collateralized loans (such as repurchase agreements and official swap arrangements); - suppliers’ credits (deferred payments for goods or services); - leases (debt is the present value at inception of all lease payments expected during the agreement, excluding operation/repair/maintenance payments). - Under this definition, arrears, penalties, and judicially awarded damages from failure to make payment under a contractual obligation that constitutes debt are debt. - External debt: determined according to the residency criterion and encompasses nonresident holdings of Argentine law peso and foreign currency debt. - External arrears: external debt obligations (principal and interest) falling due after the start date of the program that have not been paid, considering contractual grace periods. - Coverage: - This performance criterion covers the federal government. - Excludes: (i) arrears on trade credits, (ii) arrears on debt subject to renegotiation or restructuring, and (iii) arrears resulting from the nonpayment of debt commercial claims that are being liquidated prior to the start date of the program. - Monitoring: - This performance criterion will be monitored on a continuous basis. ### Exchange Restrictions, MCPs, Bilateral Payment Agreements and Import Restrictions - Commitments (continuous performance criteria): - Will not impose or intensify any exchange restrictions. - Will not introduce or modify Multiple Currency Practices (MCPs), as elaborated in the TMU. - Will not conclude bilateral payment agreements inconsistent with Article VIII. - Will not impose or intensify import restrictions for balance of payment reasons. - Note: Narrowing the scope or lowering rates of the withholding tax assessed as giving rise to MCPs by the Fund will not constitute a modification as defined under the performance criterion. ### Indicative Target — Ceiling on the Change in the BCRA’s Net Domestic Assets (NDA) - Definition: - NDA of the BCRA are defined as the difference between base money and net international reserves measured at program exchange rates. - Base money equals banknotes and coins issued by the BCRA plus banks’ accounts at the BCRA denominated in pesos. - Reserve requirement is defined as the peso-denominated reserves on account at the BCRA that banks are required to keep by regulation on average each month. - Measurement: - The ceiling applies to the monthly average of NDA for the final month of each quarter. - The change will be calculated with respect to the average of the month of December 2024 which was ARS 29,872.0 billion. - Monitoring: - Data will be provided to the Fund on a daily basis with a lag of no more than 2 days. - Adjustors: - Official non-project borrowing and grants: NDA targets will be adjusted downward (upward) by the surplus (shortfall) in program loan disbursements and grants from multilateral institutions and official bilateral partners, relative to the baseline projection reported in Text Table 2. The value of the upward adjustor would be capped at a cumulative of US$4 billion in each calendar year. - Reserve requirement: NDA ceiling will be adjusted if the minimum reserve requirement on commercial banks is changed after the start date of the program; the BCRA will reach agreement with IMF staff prior to making any changes. - FX debt issuance: The NDA ceiling for calendar year 2025 will be adjusted downward by the amount of gross external borrowing by the Federal Government and by the BCRA from private creditors in foreign currency from the start date of the program until end-2025. The value of the downward adjustor would be capped at a cumulative of US$1,500 million. ### Indicative Target — Floor on the Coverage of Social Assistance Programs - Definition: - Target is calculated as the percentage of the basic consumption basket (canasta básica alimentaria) covered by benefits from: - Asignación Universal para Protección Social, which includes Asignación Universal por Hijo and Asignación por Embarazo. - Tarjeta Alimentar. - Monitoring: - Data will be provided to the Fund with a lag of no more than 25 calendar days after the end of each month. - The indicative target will be measured as the average of the coverage in the six months prior to the test date. - The social assistance benefit will be measured for an adult-equivalent. ### Other information requirements (reporting frequencies and key items) - Daily (selected items): - Nominal closing exchange rates of the Argentinian peso against the U.S. dollar. - Total currency issued by the BCRA; deposits held by financial institutions at the BCRA; total liquidity assistance to banks through normal BCRA operations, including overdrafts; and interest rates on overnight deposits. - Disaggregated data of BCRA’s international reserve assets by source with a lag of three days. - Aggregated data on banks’ foreign exchange positions by category: public national; public provincial; private domestic; private foreign; and small banks. - Daily data on FX sales and purchases in the official and forwards FX markets showing minimum, maximum and weighted average exchange rate and amount in US dollar. - Daily FX closing rates. - Data on gross BCRA sales and purchases of securities settled in different currencies, by market segment and transaction price, with a daily frequency and lag of three days. - Data on BCRA position of non-deliverable futures by maturity, to be provided within two working days. - Data on BCRA government securities purchased and sold in the secondary market by maturity and mechanism, and corresponding price and quantities, with a lag of one day. - Daily data on BCRA-issued securities by type and interest rate. - Daily data on sales and purchases of securities settled in different currencies, recorded by the Comisión Nacional de Valores, including BCRA trading; includes daily estimation of total stocks and implicit exchange rate of representative securities transacted in the CCL and MEP modalities. - Daily data on Treasury deposits in SDRs at the BCRA. - Daily data on flows in and out of the BCRA’s SDR holding account including amount and purpose. - Daily data on external financing from each multilateral and bilateral creditor, broken down by budget support and project financing, and by largest bilateral projects. - Data on the outstanding stock of BCRA put options on government bonds. - Weekly: - BCRA balance sheet. - Weekly data on (i) the stock of BOPREAL by series, (ii) the maturity profile of BOPREAL, (iii) interest payments on BOPREAL and (iv) the stock of the debt registry. - Weekly data of international reserve liabilities components for NIR computation at current and program rates, including (i) swap lines, (ii) regulatory requirement FX deposits, (iii) Sedesa liabilities, (iv) SDR Buffer, (v) BOPREAL liabilities maturing in less than one year and (vi) other liabilities. - Weekly data on (i) Gold and (ii) SDR components of international reserves. - Fortnightly: - Interest rates on domestic debt instruments including LELITE, LEDES, LECER, LEPAS, BONAR, BONTE, BONAD and BONCER at different maturities. - Information on outstanding debt instruments (local and global): maturity, currency, legislation, characteristics (DL, Dual, CER, fixed), holders (banks, FXI, insurance, corporates, foreigners, BCRA, FGS, BNA, provinces). - Monthly (selected items, with lag no more than 25 days): - Federal government operations including monthly cash flow from the beginning to the end of the current fiscal year (and backward revisions as necessary), in formats of IMIG and AIF. - Specific reporting: revenues from sales of physical assets, licenses, and permits (and 12-month projections); income related to issuance of government debt securities (resto de rentas de la propiedad). - Data on the stock of domestic arrears. - Fiscal financing sources (below-the-line), issuance of domestic public securities, financing from within the non-financial public sector, external financing, and other financing schemes. - Detailed quarterly financing plan for the coming twelve months, to be provided one month in advance. - External financing received and projections for the coming four quarters, categorized by program and project. - On federal debt: - Domestic and external debt service (amortization and interest) of the federal government; projected monthly federal government debt amortization/repayments and interest payments, including direct and guaranteed debt. - Information on the stock of external arrears to be reported continuously. - Federal government debt stock by currency as at end month, including by creditor, instrument and direct/guaranteed. - Balances of the federal government at the central bank and in the commercial banking system needed to determine cash position. - Required and excess reserves of the banking sector in local and foreign currency. - Balance sheets of other financial corporations (non-deposit taking), including holdings of federal and provincial debt and of the BCRA instruments within one month after month end. - Data on the total loans value of all new federal government-funded public private partnerships. - Quarterly: - Federal government transfers to the provinces and the Autonomous City of Buenos Aires related to settlement of liabilities associated with pensions, revenue sharing and expenditure allocation, and payments of arrears as per ICSID or similar arbitration rulings. - Provincial government operations, with a lag of no more than two months after closing of each quarter, in the format defined by the Ministry of Finance. - Provincial debt reporting: - Quarterly provincial government debt stock by currency, within two months following the close of each quarter, including by creditor and instrument and direct/guaranteed. - Quarterly domestic and external debt service (amortization and interest) of provincial governments, within two months following the close of each quarter. - Quarterly projections for the following semester for provincial government debt amortization/repayments and interest payments, at least 30 days before the end of each quarter; include local currency and FX bonds, treasury bills, Eurobonds, domestic loans, external commercial and external official loans, and identification of guaranteed debtor in case of guaranteed debt. *Source: 1argea2025002-print-pdf - 6. Measurement: The Federal government’s primary balance will be measured at each test date* ### 2. Phasing: Proposed EFF and Other Large Arrangements _________________________ 10 ### 2. Phasing: Proposed EFF and Other Large Arrangements ### Overview - Argentina is requesting a 48-month extended arrangement under the Extended Fund Facility (EFF) with access of SDR 15.3 billion—currently equivalent to US$20.3 billion, amounting to 479 percent of quota. - The note assesses risks to the Fund’s exposure and its liquidity position arising from the proposed EFF arrangement for Argentina, provided in accordance with the policy on exceptional access (EA) and based on the assumption that all four EA criteria are met. ### Proposed EFF: Access and Phasing - Proposed phasing is highly frontloaded: - First purchase: SDR 9.2 billion, about US$12 billion, 287 percent of quota, available upon approval. - Total in first twelve months: SDR 11.5 billion, about US$15 billion, 359 percent of quota (about 75 percent of total access under the program). - After the first three purchases, remaining purchases are proposed to be spread evenly across seven semiannual reviews. - Table of proposed purchases, cumulative amounts, and percent of quota (as presented): - 2025 April — Purchase: SDR 9,160.0; Percent of quota: 287.4; Cumulative: 287.4; Credit Outstanding: 1263.1 - 2025 June — Purchase: SDR 1,529.0; Percent of quota: 48.0; Cumulative: 335.4; Credit Outstanding: 1311.1 - 2025 November — Purchase: SDR 763.0; Percent of quota: 23.9; Cumulative: 359.3; Credit Outstanding: 1335.0 - 2026 May — Purchase: SDR 545.0; Percent of quota: 17.1; Cumulative: 376.4; Credit Outstanding: 1352.1 - 2026 November — Purchase: SDR 545.0; Percent of quota: 17.1; Cumulative: 393.5; Credit Outstanding: 1350.9 - 2027 May — Purchase: SDR 545.0; Percent of quota: 17.1; Cumulative: 410.6; Credit Outstanding: 1334.1 - 2027 November — Purchase: SDR 545.0; Percent of quota: 17.1; Cumulative: 427.7; Credit Outstanding: 1294.9 - 2028 May — Purchase: SDR 545.0; Percent of quota: 17.1; Cumulative: 444.8; Credit Outstanding: 1241.4 - 2028 November — Purchase: SDR 545.0; Percent of quota: 17.1; Cumulative: 461.9; Credit Outstanding: 1178.8 - 2029 March — Purchase: SDR 545.0; Percent of quota: 17.1; Cumulative: 479.0; Credit Outstanding: 1122.4 - Total: SDR 15,267.0; Percent of quota: 479.0 - Note: After approval of the arrangement, all subsequent purchases will be contingent on the completion of a review and compliance with performance criteria to be established under the arrangement. ### Assessment and Assumptions - The assessment is provided in accordance with the policy on exceptional access (EA). - The analysis is based on the assumption that all four EA criteria are met. ### Past Fund Arrangements and Recent Developments (Select Points) - Argentina has been the largest user of Fund resources since 2018. - Historical credit outstanding: - Argentina had credit outstanding to the Fund continuously from 1983 through January 4, 2006. - Argentina repaid all its obligations to the Fund and cancelled the September 2003 SBA the following day on January 4, 2006. - No Fund credit outstanding from January 2006 until June 2018. - June 2018 SBA: - Approved a 36-month SBA with access of SDR 35.4 billion, of which 70 percent (SDR 24.8 billion) was planned to be treated as precautionary. - Access was augmented at the time of the first review in October 2018 to SDR 40.7 billion (US$57 billion, or 1,277 percent of quota) without any of the amount planned to be treated as precautionary. - The 2018 SBA went off track in August 2019 and was ultimately cancelled in July (text cuts off). ### Institutional and Preparatory Details - Approved by Zuzana Murgasova (FIN) and Mark Flanagan (SPR). - Prepared by the Finance Department and the Strategy, Policy, and Review Department. *Prepared by the Finance Department and the Strategy, Policy, and Review Department.* ### 2020. Four out of twelve planned reviews were completed, with SDR 31.9 billion (78 percent of total ### Argentina: IMF Financial Arrangements and Fund Exposure ### Background and 2022 EFF and program outcomes - A 30-month EFF was approved in March 2022 with access of SDR 31.9 billion (1,001.3 percent of quota or about US$44 billion). - This amount was equivalent to total disbursements under the 2018 SBA (including repurchases of SDR 3.2 billion made in 2021 and early 2022 before approval of the EFF). - Eight of the planned ten reviews were completed; the arrangement expired without completion of the ninth or tenth reviews. - A total of SDR 31.1 billion (97 percent of total access) was disbursed under the 2022 EFF. - An Ex-Post Evaluation (EPE) completed in January 2025 found that a gradualist reform strategy, large adverse shocks, and progressively weaker implementation resulted in outcomes substantially worse than the baseline by end-2023: inflation exceeding 200 percent, liquid FX reserves fully depleted, and external bond spreads reaching about 2,500 basis points. - After the November 2023 election, authorities implemented a sharp fiscal consolidation to bring the overall budget to balance and an exchange rate devaluation of 120 percent, while discontinuing monetary financing. This reduced money growth and central bank quasi-fiscal losses, reduced inflation after a large initial spike, allowed some accumulation of FX reserves, and helped economic activity begin recovering in the second half of 2024. - NIR remained negative and large upcoming public and external debt obligations continued to pose challenges to a durable resolution of Argentina’s Balance of Payments problem. ### IMF financial arrangements, exposure, and current status - As of end-March 2025, Argentina is the Fund’s largest borrower with credit outstanding of SDR 31.1 billion. - Repurchases under the 2018 SBA were completed in July 2024. - Repurchases under the 2022 EFF are scheduled to start in September 2026, with peaks in 2029 through 2031 at SDR 5.2 billion annually, concluding in 2034. - Projected debt service to the Fund under the 2022 EFF (including repurchases, charges, and surcharges) will peak at SDR 6.2 billion in 2029. ### Debt situation and outlook - External debt in U.S. dollar terms: relatively stable in 2021-23; commercial debt rose while non-trade (financial) debt was gradually reduced. - 2024 dynamics: commercial debt backlog began to unwind; public sector debt declined due to an ambitious stabilization program; sovereign spreads remained elevated. - Tax amnesty in H2:2024 helped reduce external debt by prompting repatriation and investment in sovereign and corporate bonds. - Total external debt-to-GDP ratio is below the median of recent exceptional access (EA) cases, but external public sector debt is elevated and accounts for almost two thirds of Argentina’s external debt. - About 44 percent of public external debt is owed to the official sector; the IMF is the single largest creditor. - Short-term debt represents about a quarter of total external debt. ### External debt service burden and projections - Total external debt service averaged about 15 percent of GDP in 2021-24. - Under the baseline of the proposed EFF, external debt service would subside but remain elevated in 2025-26, at about 11 percent of GDP on average, of which 0.5 percent of GDP per year are obligations to the Fund (mainly interest payments), while repurchases under the 2022 EFF come due after Q2:2026. - Table 4 excerpt (selected outturns and ratios): - Total external debt service (in millions of U.S. dollars): 2020: 97,020; 2021: 99,083; 2022: 94,181; 2023: 86,903; 2024: 73,305. - Total external debt service (in percent of GDP): 2020: 25.5; 2021: 20.6; 2022: 15.0; 2023: 13.4; 2024: 11.7. - Federal multilateral (of which IMF) debt service (in millions of U.S. dollars): IMF: 2020: 1,471; 2021: 5,127; 2022: 18,642; 2023: 20,986; 2024: 7,913. - Federal multilateral (of which IMF) debt service (in percent of GDP): IMF: 2020: 0.4; 2021: 1.1; 2022: 3.0; 2023: 3.2; 2024: 1.3. ### Public debt sustainability assessment - Public debt is assessed to be sustainable but not with high probability; gray zone solvency and liquidity tests are met (including in scenarios of delayed market access). - Gross federal government (Treasury) debt rose to over 150 percent of GDP in 2023, then fell to 86 percent of GDP in 2024 due to exchange rate valuation effects and a sharp fiscal adjustment (of over 5 percentage points of GDP). - Debt is projected to fall to about 56 percent of GDP by 2030 assuming continued adherence to a strong fiscal anchor and growth-enhancing deregulatory and pro-market reforms. - Overall risks to debt sustainability are judged significant and hinge on successful program implementation; external shocks and policy slippages could jeopardize macroeconomic stability and market access. ### Access and phasing of the proposed 2025 EFF - The proposed arrangement would exceed normal annual access limits (NAAL); proposed annual access of 359 percent of quota in the first twelve months would exceed the NAAL (200 percent of quota) by SDR 5.1 billion. - The initial disbursement would be among the largest in Fund history; initial disbursement of 60 percent of total access under the arrangement would be unprecedented for an EFF (median large EFF: 20 percent; 2022 EFF: 22 percent; median large SBA: 29 percent; Argentina’s 2018 SBA: 30 percent). - Proposed total access of SDR 15.3 billion would keep Argentina’s Fund credit outstanding above normal cumulative access limits (NCAL) for an extended period, with credit outstanding at the end of the EFF higher by 139 percent of quota than the pre-program level. - Initial disbursement would raise Argentina’s Fund credit outstanding to 1,263 percent of quota, SDR 21.1 billion higher than the NCAL of 600 percent of quota. - Peak Fund credit to Argentina is projected to reach SDR 43.1 billion in 2026 (1,352 percent of quota). - Credit outstanding would remain elevated, reaching SDR 35.5 billion at the end of the program in April 2029 (1,115 percent of quota), and remaining above the NCAL until September 2031. ### Capacity to repay (CtR) and liquidity indicators - Fund credit outstanding over GIR would peak at 154 percent of GIR in 2025. - This is more than three times the median of 47 percent for recent EA cases and exceeds peak ratios during the two previous arrangements, though projected to decrease substantially from 2026 owing to a sizable projected increase in GIR. - Argentina’s Fund credit/GIR ratio would be projected to decrease from 2026 onwards due to projected GIR increases. - Standard CtR indicators based on GIR do not account for the sizeable gap between Argentina’s GIR and NIR. End-2024 GIR amounted to US$16.6 billion and NIR amounted to negative US$2.4 billion. - NIR improved since end-2023 (when Fund debt service as a percent of NIR peaked during SBA repayment) but remained weak (around negative US$6 billion) and decreased in early 2025. - CtR indicators based on NIR for Argentina show Fund credit outstanding as a percent of NIR is projected to generally be lower for the proposed arrangement than for the 2018 SBA or 2022 EFF, owing to projected increases in NIR during the program. - Capacity to repay indicators hinge critically on projections of a substantial increase in reserves, which rely on projected large volumes of financial inflows. - Argentina’s public gross external financing requirement in coming years is substantially higher than proposed Fund disbursements; a large proportion is projected to be filled by international market issuance, representing Argentina’s most sustained period of market access in recent decades and underscoring risks. - Lower-than-projected financial inflows would pose risks to projected increases in GIR and NIR and to Argentina’s CtR; downside risks to GIR projections materialized in previous arrangements and weighed on CtR. ### Repayment phasing and debt service profile - Repurchases under the 2022 EFF and the proposed arrangement would overlap between 2029 and 2034 and peak at SDR 7.3 billion in 2031, compared to a peak of SDR 13.3 billion in SBA repurchases during 2023. - Debt service to the Fund would exceed 100 percent of quota each year during 2026-2034, and 200 percent of quota each year during 2028-2032. - Peak debt service ratios under the proposed arrangement would be below those projected upon approval of the previous two arrangements (which incorporated compressed repayments of the 2018 SBA). - Total external debt service would peak at 74 percent of exports in 2025 (above the median for recent EA cases of around 58 percent). - Peak debt service to the Fund as a percent of exports and as a percent of GIR would be near the median EA case. - The ratio for debt service to the Fund to general government revenues would remain below the median of recent EA arrangements. ### Risks to the Fund’s aggregate financial position - The proposed arrangement would raise concentration of the lending portfolio, returning it to the peak experienced during the 2018 SBA and keeping it high throughout the program. - The large proposed increase in credit to Argentina would keep Fund exposure to Argentina well above precautionary balances (PBs) and raise concentration of income and associated risks. - By contrast, Fund liquidity would remain at adequate levels under the projections. ### Key statistics and projections (selected, preserving source values) - 2022 EFF access: SDR 31.9 billion (1,001.3 percent of quota; about US$44 billion). - Disbursed under 2022 EFF: SDR 31.1 billion (97 percent of total access). - Argentina Fund credit outstanding as of end-March 2025: SDR 31.1 billion. - Proposed 2025 EFF total access: SDR 15.3 billion. - Proposed initial annual access in first 12 months: 359 percent of quota (exceeds NAAL of 200 percent of quota by SDR 5.1 billion). - Proposed initial disbursement share of total access: 60 percent. - Projected peak Fund credit: SDR 43.1 billion in 2026 (1,352 percent of quota). - Projected credit outstanding at end of program (April 2029): SDR 35.5 billion (1,115 percent of quota). - Repurchase schedule peaks: SDR 5.2 billion annually for 2029–2031 (2022 EFF); SDR 7.3 billion peak in 2031 (overlap with proposed arrangement). - Projected peak debt service to Fund (including repurchases, charges, surcharges): SDR 6.2 billion in 2029 (2022 EFF). - End-2024 GIR: US$16.6 billion; end-2024 NIR: negative US$2.4 billion. - NIR in early 2025: around negative US$6 billion. - Total external debt service (in percent of GDP): 2024: 11.7 percent. - Total external debt service (in millions of U.S. dollars): 2024: 73,305. - Federal IMF debt service (in millions of U.S. dollars): 2024: 7,913. - Gross federal government (Treasury) debt: over 150 percent of GDP in 2023; 86 percent of GDP in 2024; projected about 56 percent of GDP by 2030. - Projected Fund credit to Argentina (Table 5, selected annual figures in millions of SDR): 2025: 42,552.0; 2026: 42,808.7; 2027: 40,648.7; 2028: 36,897.0; 2029: 31,367.9; 2030: 24,230.5; 2031: 16,911.4; 2032: 10,244.0; 2033: 5,811.6; 2034: 2,925.4. - Debt service due on GRA credit (in millions of SDR, selected): 2025: 2,342.1; 2026: 3,487.0; 2027: 5,873.9; 2028: 7,287.3; 2029: 8,260.5; 2030: 8,913.2; 2031: 8,631.5; 2032: 7,510.2; 2033: 4,918.8; 2034: 3,223.3. - Total external debt (in percent of GDP, selected): 2025: 42.5; 2026: 41.7; 2027: 42.5; 2028: 43.5; 2029: 42.8; 2030: 40.9; 2031: 38.9; 2032: 37.3; 2033: 35.9; 2034: 34.6. - GRA credit to Argentina (in percent of quota, selected): 2025: 1,335.0; 2026: 1,343.1; 2027: 1,275.3; 2028: 1,157.6; 2029: 984.2; 2030: 760.2; 2031: 530.6; 2032: 321.4; 2033: 182.3; 2034: 91.8. *Source: IMF staff report and Finance Department data as presented in the provided chapter/section.* ### 36.9 percent of GRA credit outstanding to a ### Argentina: GRA Credit Exposure and Program Assessment ### GRA Credit Concentration and Shares - Fund GRA credit outstanding to Argentina upon approval: 40,260 - In percent of projected total GRA credit outstanding upon approval: 43.1 - 36.9 percent of GRA credit outstanding to a projected 43.1 percent at the time of approval—a share comparable to the recent peaks in FY 2019 and FY 2020 during the 2018 SBA. - Its share would remain above 40 percent until FY 2028, well above the 1985-2010 average of 27 percent for the largest borrower. - Fund GRA credit outstanding to top five borrowers: 63,371 - In percent of total current GRA credit outstanding: 75.3 percent - In percent of total GRA credit outstanding upon approval: 77.7 percent - The share of GRA credit to Western Hemisphere borrowers would increase to 54.6 percent, from the current 49.6 percent. ### Liquidity and Precautionary Balances - As of 3/31/2025: - Current one-year Forward Commitment Capacity (FCC): 176,225 - Impact of approval on FCC: -15,267 - (in percent of current one-year FCC): -8.7 - Fund's precautionary balances (Projections for end-April 2025): 25,900 - Fund's residual burden-sharing capacity: 927 - In percent of current precautionary balances: - Fund GRA credit outstanding to Argentina upon approval: 155.4 - Fund GRA credit outstanding to top five borrowers: 244.7 - The forward commitment capacity is projected to decrease by 8.7 percent at the time of the first purchase, from SDR 176 billion to around SDR 161 billion. - FCC would remain well within the 140 to 180 billion range experienced since 2020. ### Precautionary Balances Coverage and Purchases-to-Borrower (PB) Profile - Ratio of PBs to Argentina’s credit outstanding: - Around 64 percent upon approval - Projected to rise to around 87 percent by FY 2029 - With projected higher Argentina credit outstanding broadly balanced by recent and projected increases in PBs, the profile of coverage is similar to the 2022 EFF despite large exposure. ### Income, Burden-Sharing, and Concentration Risks - Annual capacity of the BSM in 2022: SDR 70 million. - BSM capacity increased to SDR 927 million as of end-March 2025. - Charges and surcharges paid by Argentina in 2022: SDR 1,294 million. - Charges and surcharges projected for FY2026 under the proposed arrangement: SDR 2,309 million. - Gaps that could not be covered by the symmetric BSM: - SDR 1,224 million in 2022 - SDR 1,382 million in FY2026 - ARG's GRA charges/surcharges in FY26 in percent of current residual burden sharing capacity: 249.0 - The proposed arrangement would increase Argentina’s Fund credit outstanding by over SDR 10 billion, making Argentina the Fund’s highest-ever exposure. ### Program Assessment, Capacity to Repay, and Risks - Credit outstanding by the end of the program in April 2029 would increase by over SDR 4 billion (139 percent of quota) from current levels and would remain over 1,000 percent of quota until November 2029. - Argentina’s debt service indicators to the Fund are within ranges typical of other recent EA arrangements but would persist at high levels for several years after the end of the program period. - Repurchases to the Fund come due beginning in September 2026, coinciding with large FX debt service obligations to private bondholders. - Aggregate risks to the Fund’s financial position from the Argentina exposure remain elevated due to: - Increased credit concentration risks and income risks with scheduled charges and surcharges exceeding the buffering capacity of the BSM. - Precautionary balances remaining below Argentina's credit outstanding throughout the program period. - Large exposure size posing risks of accommodation of program outcomes insufficient to restore medium-term viability and avoid large and difficult-to-manage arrears. - On approval of the arrangement the Fund’s FCC would be reduced by SDR 15.3 billion (8.7 percent), albeit remaining within its recent range. - Risk mitigation measures and considerations: - Authorities’ track record of adhering to a strong fiscal anchor. - Authorities’ commitment to meet all FX obligations, ease distortive FX restrictions, and transition to a more flexible exchange rate regime. - Proposed burden sharing and financing assurances from other multilateral and bilateral partners. - Authorities’ commitment to make early repurchases to the Fund should market access materialize sooner and in larger volumes than anticipated. - Residual risks will remain high even with full program implementation given elevated risks to Argentina’s economic outlook and exceptional risks to the Fund’s finances posed by the Argentina exposure. ### Market Developments and Prior Actions (April 11, 2025 and recent period) - Market conditions: volatile since mid-March with sovereign spreads surging to about 900 basis points; FX gaps risen to around 25-27 percent (from 10 percent earlier in the year); monthly headline inflation in March rose to 3.7 percent (compared to 2.4 percent in February); net international reserves around negative US$7 billion. - Prior actions implemented to transition monetary and FX regime (effective immediately): - New FX regime: transition from a crawling peg to an exchange rate band regime with initial band ARS/USD 1,000 to 1,400; upper and lower ends of the band will respectively increase and decrease daily consistent with a monthly crawl rate of 1 percent. - FX intervention rules: BCRA to purchase FX offered at the floor and sell FX at the ceiling; within the band BCRA may purchase FX at its discretion; FX interventions will be unsterilized and consistent with program objectives; FX sales within the band are not envisaged. - Monetary policy: abandon broad base money ceiling; replace with a traditional monetary targeting framework (monitoring private M2, excluding remunerated deposits); strict limits on net domestic assets of the BCRA to serve as an additional nominal anchor. - Prior actions easing FX restrictions and controls: - Ease import restrictions: eliminate delays in access to FX for payments for the import of final goods and services (from 30 to zero days); ease restrictions for import of capital goods; temporarily eliminate the 90-day cross-restriction for importers who accessed the parallel FX markets before the introduction of the new FX regime. - Ease dividend and intra-company debt payments: eliminate restrictions on access to FX for payment of corporate dividend payments from new flows of earnings reported in financial statements starting in 2025; stock of legacy dividends and intra-company debt payments (acquired before January 1, 2025) to be cleared gradually through subscription with pesos of a USD-denominated bond to be issued by the BCRA. - Ease restrictions on individuals: lift the US$200 monthly cap on FX purchases and eliminate administrative restrictions on FX purchases by individuals; withholding taxes on individual FX credit card purchases and tourism outflows will remain at 30 percent. - Additional steps: - Executive Decree (DNU) eliminating the export incentive scheme (whereby 20 percent of exports could be liquidated in the parallel FX market) to go into effect on April 14, 2025; this ensures all export liquidation takes place in the official FX market. - BCRA reached final agreement with the PBOC to refinance for an additional 12 months the activated portion of the swap line (worth about US$5 billion). - Government plans to boost primary fiscal surplus for 2025 by 0.3 percent of GDP (to 1.6 percent of GDP) through reductions in transfers supported by identified governance and efficiency improvements. *Prepared by Western Hemisphere Department; Supplementary Information to the Request for an Extended Arrangement under the Extended Fund Facility (April 11, 2025).* --- _Source: https://www.imf.org/-/media/files/publications/cr/2025/english/1argea2025002-print-pdf.pdf_