Press Release No. 18/485

IMF Executive Board Completes Second Review Under Argentina’s Stand-By Arrangement, Approves US$7.6 Billion Disbursement

December 19, 2018

The Executive Board of the International Monetary Fund (IMF) completed today the second review of Argentina’s economic performance under the 36-month Stand-By Arrangement (SBA) that was approved on June 20, 2018. The completion of the review allows the authorities to draw the equivalent of SDR 5.50 billion (about US$ 7.6 billion), bringing total purchases since June to SDR 20.21 billion (about US$ 28.09 billion). In completing the review, the Executive Board also approved the authorities’ request for modification of performance criterion.

Following the Executive Board discussion of Argentina’s economic plan, Mr. David Lipton, the IMF’s First Deputy Managing Director stated:

“There are early signs that the redesigned economic reform program, including a new monetary policy framework, is yielding results. The peso has stabilized and inflation, though still high, has started to decline, as the pass-through from past peso depreciation is waning. Nevertheless, the Argentine economy is still contracting and remains vulnerable to shifts in market sentiment. Economic activity is expected to start recovering in the second quarter of 2019.

“The passage of the 2019 budget with broad political support has helped to solidify confidence in the authorities’ economic reform plan and policy continuity. Fiscal discipline created space for one-off payments that helped shield the most vulnerable from the burden of adjustment. Going forward, it will be critical to continue safeguarding fiscal targets against implementation challenges and weaker-than-expected revenue collection. Maintaining social spending should remain a key priority. Further progress is needed to improve the medium-term fiscal framework and debt management.

“Continued commitment to the zero growth in base money and to the market-determined exchange rate will further strengthen the credibility of the monetary policy framework, re-anchor inflation expectations, and enhance the economy’s resilience to external shocks. Preparations are ongoing to recapitalize the central bank and enhance its operational independence.

“As the economy stabilizes, it would be key to pivot the reform agenda toward boosting medium-term growth. In this context, structural reforms would help boost investment and productivity; increase the employability of women, youth, and lower-income workers; and provide greater support to those in poverty. Efforts could also be directed toward improving the efficiency of social spending while expanding the coverage of the social safety net. It would also be important to continue removing distortions in the tax system, improving labor market regulations, putting the pension system on a sustainable financial footing, and strengthening governance.

“Continued steadfast implementation of the stabilization plan will be essential to reassure domestic and international investors, solidify Argentina’s return to macroeconomic stability, and durably improve the living standards for all Argentines.”