Press Release: IMF Completes Third Review of Argentina's Stand-By Arrangement, Approves US$1.05 Billion Disbursement

July 28, 2003

The Executive Board of the International Monetary Fund (IMF) today completed the third review of Argentina's performance under a seven-month, SDR 2.17 billion (about US$3.04 billion) Stand-By Arrangement, which was approved on January 24, 2003 (see Press Release No. 03/09). The completion of this review enables the release of a further SDR 749 million (about US$1.05 billion). The Executive Board also approved Argentina's request for a waiver of the relevant structural performance criterion and the applicability of fiscal quantitative performance criteria for end-June 2003.

Following the Executive Board's discussion on Argentina, Horst Köhler, Managing Director and Chairman, said:

"Argentina's recent macroeconomic performance continued to be favorable. Consumer confidence has risen, inflation has declined further, financial market indicators have strengthened, and the economic recovery has been encouraging. Under the new government, Argentina has continued to meet the fiscal and monetary targets of the transitional arrangement with comfortable margins.

"Fiscal policy has been overperforming and there is room to exceed the primary surplus target for 2003. The authorities are committed to maintain fiscal discipline, and have undertaken important tax administration reforms that will ease the transition to the higher fiscal savings that will be required over the medium term to restore solvency to the public finances.

"Given the absence of inflation pressures, a continued cautious expansion of base money appears appropriate. Nevertheless, the authorities need to remain vigilant to keep inflation in the low single-digit range.

"The work of the new government on the structural reform agenda needs to be accelerated in the period ahead. Sustaining growth over the medium term will require consistent implementation of a comprehensive structural reform program aimed, inter alia, at bank restructuring to restore financial intermediation, tax and intergovernmental relations reforms to achieve sustainable public finances, a framework for the adjustment of utility tariffs, and addressing poverty and social issues. More effort will also have to be directed toward entrenching legal certainty, and respect for creditor rights.

"Medium-term prospects will hinge critically on public debt restructuring. It is important to continue to move the negotiating process with private creditors forward decisively.

"The IMF welcomes the authorities' desire for a strong medium-term successor arrangement that would support higher sustainable growth and ensure the solvency of the public finances," Mr. Köhler stated.


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