IMF Executive Board Completes Third Review Under Argentina's Stand-By Arrangement, Approves US$10.8 Billion Disbursement

IMF News, April 5, 2019

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Canonical URL: IMF Executive Board Completes Third Review Under Argentina's Stand-By Arrangement, Approves US$10.8 Billion Disbursement

The Executive Board completed the third review of Argentina’s economic performance under the 36-month Stand-By Arrangement approved on June 20, 2018.
Completion of the review allows the authorities to draw the equivalent of SDR 7.8 billion (about US$10.8 billion).
Total purchases since June 2018 amount to SDR 28.01371 billion (about US$38.9 billion).

Economic activity contracted in 2018 but there are signs that the recession has bottomed out; a gradual recovery is expected to take hold in the coming quarters.
Inflation remains high with inflation expectations rising and inflation inertia proving difficult to break.
High fiscal and current account deficits are falling, reducing key vulnerabilities that led to the financial crisis last year.

The Argentine government reduced the 2018 primary deficit below the program target, demonstrating resolve to put the public debt-to-GDP ratio on a sustainable path.
In light of weaker-than-expected tax revenues in the first half of the year, continued prudence in the execution of spending plans and further steps to strengthen revenues are key to bring the 2019 fiscal position to a primary balance.
Further effort is needed to improve the medium-term fiscal framework and debt management.

After a few months of relative stability, financial volatility has picked up in recent weeks as global financial conditions have become less favorable and as inflation outcomes have disappointed.
The BCRA reacted by recalibrating its monetary policy, maintaining zero growth in the monetary base until the end of the year.
A new central bank charter has been sent to Congress and, if passed into law, will strengthen the credibility of monetary policy.

Protecting the most vulnerable from the impact of the recession and from high inflation remains a key priority.
Authorities have taken actions to improve the coverage of the social safety net and to provide greater resources to the poor.
Continued work is needed to address remaining gaps in coverage of the social safety net and to make social programs more effective in reducing poverty.

Favorable market conditions have allowed the government to fully rollover maturing debt over the past few months.
The interest rate paid on that debt has fallen and the authorities are deepening efforts to extend maturities on newly-issued debt.
Authorities are implementing policies to develop domestic currency debt markets.

Supply-side reforms are essential to achieve strong, sustainable, and equitable growth and to raise living standards.
Priorities include:
- designing a less distortionary tax system,
- encouraging greater competition in domestic product markets,
- removing barriers to trade and foreign investment,
- strengthening governance and confronting corruption,
- fostering gender equity.

The success of the authorities’ policy plans relies on continued steadfast implementation.
Building broad-based support for policies is necessary to lessen economic vulnerabilities, raise Argentina’s growth potential, and foster market confidence.

IMF Press Release No. 19/107 (April 5, 2019) — IMF Communications Department