IMF Executive Board Approves 30-month US$44 billion Extended Arrangement for Argentina and Concludes 2022 Article IV Consultation
IMF News, March 25, 2022
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- Published: March 25, 2022
Program objectives and core policy measures
- Fiscal and monetary framework:
- Gradual elimination of monetary financing of the fiscal deficit.
- Enhanced monetary and exchange rate policy framework intended to deliver positive real interest rates and a competitive real exchange rate.
- Policies to strengthen the domestic peso debt market and encourage demand for peso assets.
- Fiscal consolidation and public finance:
- Sustained and growth-friendly fiscal consolidation aimed at strengthening debt sustainability.
- Improve efficiency and transparency of government spending.
- Improve the structure of spending by reducing costly and untargeted energy subsidies while expanding infrastructure spending.
- Protect well-targeted social assistance programs and prudently manage wages and pensions.
- Need to improve the efficiency, fairness, and compliance of the tax system.
- Structural and inclusion measures:
- Promote labor and gender inclusion.
- Enhance sustainability and efficiency of key sectors, including energy.
- Strengthen the investment climate by gradually removing economic distortions and providing a more predictable regulatory framework.
- Improve governance, including boosting the efficiency and transparency of public spending and reinforcing the AML/CFT regime.
- Conditionality and sequencing:
- Actions aim to pave the way for an eventual, conditions-based, easing of foreign exchange controls.
- Program includes steps to strengthen the central bank’s balance sheet and governance framework over the medium term.
Executive Board and Managing Director statement
- Managing Director Kristalina Georgieva:
- Characterized Argentina’s situation as facing exceptional economic and social challenges: depressed per capita income, elevated poverty levels, persistent high inflation, a heavy debt burden, and low external buffers.
- Described the program as setting pragmatic and realistic objectives with credible policies to strengthen macroeconomic stability.
- Emphasized importance of strong political and social consensus and medium-term commitment to sustain implementation.
- Highlighted that risks are exceptionally high and that early program recalibration may be critical to achieve objectives.
Executive Board assessment and policy guidance
- Broad endorsement of program thrust; noted fragility aggravated by the pandemic and spillovers from the war in Ukraine.
- Key priorities and recommendations from Directors:
- Credible, sustained, and growth-friendly fiscal consolidation to strengthen debt sustainability and discontinue monetary financing.
- End monetary financing and implement the enhanced monetary policy framework to deliver positive real interest rates.
- Maintain a competitive real exchange rate and adapt capital flow management over time to secure trade surpluses, encourage long term inflows, and boost reserve accumulation.
- Rebuild international reserves.
- Protect and target social assistance while managing wages and pensions prudently.
- Strengthen domestic peso debt market and the sustainability/efficiency of key sectors.
- Improve investment climate and regulatory predictability, including in strategic sectors.
- Strengthen governance and transparency of public spending; reinforce AML/CFT regime.
- Risk recognition and program monitoring:
- Program subject to exceptionally high risks; vulnerability to external shocks and implementation difficulties noted.
- Spillovers from the war in Ukraine are materializing; Directors welcomed bringing forward the first program review and urged readiness to recalibrate policies to secure fiscal objectives and contain second-round inflationary effects.
- Elevated exposure to Argentina over an extended period creates major financial and reputational risks for the Fund; finely balanced judgements will be needed during program life.
- Medium-term view:
- Beyond program period, further efforts required to cement stability: strengthen debt sustainability, bolster the central bank’s balance sheet and governance, and tackle regulatory barriers to productivity, investment, and formal employment.
- Some Directors recommended incorporating additional medium-term reforms into the current program to increase credibility.
Selected economic and financial indicators (estimates and projections)
- Population (2013): 41.5 million
- Quota (current; millions SDR / % total): 2,117 / 0.89
- Main products and exports: soybeans, automobiles, corn
- Per capita GDP (2014): US$12,873
- Gini coefficient (2011): 0.45
- National income and prices (Annual percentage change)
- GDP at constant prices: 2021 Est. 10.2; 2022 Proj. 3.5 - 4.5; 2023 Proj. 2.5 - 3.5
- Consumer price index (eop): 2021 Est. 50.9; 2022 Proj. 38.0 - 48.0; 2023 Proj. 34.0 - 42.0
- External sector (Percent of GDP unless otherwise indicated)
- Current account balance: 2021 Est. 1.3; 2022 Proj. 0.5; 2023 Proj. 0.4
- Trade balance: 2021 Est. 3.2; 2022 Proj. 2.4; 2023 Proj. 2.3
- Foreign direct Investment (net): 2021 Est. 1.1; 2022 Proj. 1.6
- Gross international reserves (US$ billions): 2021 Est. 39.7; 2022 Proj. 49.1; 2023 Proj. 51.5
- Change in Net International Reserves (US$ billions) 1/: 2021 Est. -1.5; 2022 Proj. 5.8; 2023 Proj. 4.0
- Terms of trade (percent change): 2021 Est. 9.4; 2022 Proj. -0.1; 2023 Proj. -4.1
- REER (avg., percent change): 2021 Est. 4.3; 2022 Proj. …
- Federal government operations
- Federal primary balance 2/: 2021 Est. -3.0; 2022 Proj. -2.5; 2023 Proj. -1.9
- Revenues: 2021 Est. 18.2; 2022 Proj. 18.6
- Primary expenditures: 2021 Est. 21.2; 2022 Proj. 20.7; 2023 Proj. 20.5
- Federal overall balance: 2021 Est. -4.5; 2022 Proj. -4.0; 2023 Proj. -3.4
- Federal government debt: 2021 Est. 80.6; 2022 Proj. 74.4; 2023 Proj. 74.3
- excluding intra public sector 3/: 2021 Est. 49.6; 2022 Proj. 47.8; 2023 Proj. 49.4
- Monetary operations
- Monetary base: 2021 Est. 7.9; 2022 Proj. 7.5
- Monetary financing of the fiscal deficit: 2021 Est. 3.7; 2022 Proj. 1.0; 2023 Proj. 0.6
- BCRA securities: 2021 Est. 10.9; 2022 Proj. 9.3; 2023 Proj. 9.1
- BCRA quasi-fiscal cost: 2021 Est. 3.3; 2022 Proj. 2.9
Sources: National authorities and Fund staff estimates and projections. Notes:
- 1/ TMU definition.
- 2/ Primary balance excludes BCRA profit transfers.
- 3/ Excludes federal government debt held by the BCRA and the Social Security Fund (FGS).
- US dollar amounts were calculated using today’s exchange rate: (SDR 0.724951/US$).
IMF Executive Board press release, March 25, 2022.
