Press Release No. 22/344

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

October 7, 2022

• The Executive Board of the International Monetary Fund completed today the second review of Argentina’s 30-month EFF arrangement, allowing for an immediate disbursement of about US$ 3.8 billion.
• Decisive actions by the new economic team have been critical to stabilizing markets and to begin rebuilding confidence.
• Relevant end-September quantitative program targets were met, including for net international reserves and monetary financing of the fiscal deficit.
• In the context of a more challenging global backdrop and ongoing domestic risks, steadfast and continued program policy implementation going forward will be critical to achieve program objectives, entrench stability, and secure sustained and inclusive growth.

Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed today the second review of the extended arrangement under the Extended Fund Facility (EFF) for Argentina. The Board’s decision enables an immediate disbursement of SDR 3 billion (about US$3.8 billion), bringing total disbursements under the arrangement to about US$17.5 billion.

In completing the review, the Executive Board assessed that recent decisive actions were critical to stabilizing markets, rebuilding confidence, and to secure key quantitative targets, including the end-September floor for net international reserves and ceiling on monetary financing of the fiscal deficit. The Board also approved waivers of non-observance for the continuous performance criteria relating to exchange restrictions and multiple currency practices. [1]

Argentina’s 30-month EFF arrangement, with access of SDR 31.914 billion (equivalent to US$44 billion, or about 1000 percent of quota), was approved on March 25, 2022 (see Press Release No. 22/89). The authorities’ IMF-supported program provides Argentina with balance of payments and budget support that is linked to the steadfast continued implementation of program polices aimed at strengthening public finances, tackling persistent high inflation, boosting reserve accumulation, and setting the basis for sustained and inclusive economic growth.

Following the Executive Board discussion on Argentina, Ms. Kristalina Georgieva, Managing Director, issued the following statement:

“In response to the market disruptions of mid-2022, Argentina’s new economic team adopted decisive corrective measures that are starting to restore confidence and policy credibility. Prudent macroeconomic policies and steadfast program implementation will be needed to address the still fragile situation, strengthen stability, and deliver the objectives of the authorities’ Fund-supported program, which remains a key macroeconomic anchor.

“Achieving the fiscal primary deficit targets of 2.5 percent of GDP in 2022 and 1.9 percent of GDP in 2023 is critical to moderate import growth, accumulate reserves, strengthen debt sustainability, and further reduce reliance on central bank financing of the deficit. This will require further strengthened expenditure controls and increased efficiency of subsidies and social spending, which in turn would create space for critical energy infrastructure projects and targeted assistance to the vulnerable.

“Continued resolute implementation of the monetary policy framework is essential to sustain positive real interest rates and tackle the persistent high inflation. Doing so will also encourage demand for peso assets, increase external competitiveness, and boost reserves. While targeted FX measures can temporarily support the balance of payments, they are not a substitute for sound macroeconomic policy. As such, exchange restrictions and multiple currency practices should be unwound as conditions permit and reserve coverage strengthens.

“A proactive debt management approach, coupled with prudent macroeconomic policies, remains necessary to mobilize domestic peso financing while mitigating rollover risks. Continued good faith efforts, on all sides, are also needed to secure a successful restructuring of Paris Club debt. Ensuring that international partners deliver on financing commitments is also critical to support key program objectives.

“The structural reform agenda remains critical to address deep-seated economic challenges. Continued progress is needed to strengthen public financial management, monetary transmission and central bank finances, as well as the frameworks to combat tax evasion and money laundering. Similarly, strong and stable regulatory frameworks can help boost Argentina’s export potential in key sectors, including energy.

“Amid the challenging global environment and ongoing domestic risks, resolute implementation of the program and agile policy making are critical to meet objectives and secure stability. Broad political support for the program’s policies remains essential in the period ahead.”

[1] Given that the Board meeting occurred after end-September, waivers of applicability were also approved for two end-September targets—where data were not yet available—including the primary fiscal balance.