IMF Executive Board Completes First Review of the Extended Arrangement Under the Extended Fund Facility for Argentina

IMF News, June 24, 2022

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Canonical URL: IMF Executive Board Completes First Review of the Extended Arrangement Under the Extended Fund Facility for Argentina

The Executive Board completed the first review of the extended arrangement under the Extended Fund Facility (EFF) for Argentina on June 24, 2022.
The decision enables an immediate disbursement of SDR 3 billion (about US$ 4.01 billion).
Argentina’s 30-month EFF arrangement has access of SDR 31.914 billion (equivalent to US$44 billion, or about 1000 percent of quota) and was approved on March 25, 2022.

The authorities met all end-March 2022 and continuous performance criteria and indicative targets.
The Executive Board welcomed that initial progress was made on the structural front and noted the authorities’ commitment to implement policies consistent with the unchanged annual program objectives.
The program’s objectives include: strengthening public finances, tackling persistent high inflation, boosting reserve accumulation, and setting the basis for more sustainable and inclusive economic growth.

The Argentine economy is continuing its post-pandemic recovery but is being affected by shocks associated with the war in Ukraine and broader global uncertainties.
Higher global food and energy prices are adding to inflation pressures and challenging fiscal and reserve accumulation goals.
The recently modified 2022 budget reprioritizes spending to accommodate higher energy subsidies and appropriate social assistance to protect the vulnerable from the food price shock.
Adhering to the primary fiscal deficit target of 2.5 percent of GDP in 2022 is described as essential to: moderate domestic demand, limit monetary financing of the deficit, and support reserve accumulation.

The authorities remain committed to the agreed multi-pronged strategy to tackle persistent high inflation, including by continuing to normalize policy interest rates consistent with achieving positive real interest rates.
Steadfast implementation of the enhanced monetary policy framework is said to be essential to encourage demand for peso assets, preserve external competitiveness, and support unchanged end-year reserve accumulation targets.
In the context of recent market volatility, strengthening and deepening the peso debt market is highlighted as an essential pillar of the 30-month EFF and remains critical alongside fiscal target implementation.
Ensuring the timely delivery of financial commitments from Argentina’s international partners is noted as vital to help boost reserve buffers and support reform efforts.

Continued progress is needed in implementing the structural reform agenda, including:
- strengthen public expenditure management;
- strengthen central bank finances;
- strengthen the AML/CFT regime;
- develop key sectors through enhancements in the predictability and effectiveness of regulatory frameworks.
Sustained efforts are also needed to improve tax compliance, reduce energy subsidies, and strengthen public financial management.

“Decisive implementation of program policies will be critical to support Argentina’s economic recovery, strengthen macroeconomic stability, and make further progress in addressing its deep-seated challenges to set the basis for more sustainable and inclusive growth.”
The Board’s completion of the first review “marks the conclusion of an important initial step under the program which aims to support Argentina’s ongoing economic recovery, strengthen macroeconomic stability, and begin to address its deep-seated challenges.”

Press Release No. 22/226 — June 24, 2022, IMF Communications Department