IMF staff and the Argentine Authorities Reach Staff-Level Agreement on the Third Review Under the Extended Fund Facility Arrangement

IMF News, December 3, 2022

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Published: December 3, 2022

Agreement outcome and procedural status

IMF staff and the Argentine authorities reached staff-level agreement on the third review under Argentina’s 30-month EFF arrangement.
The agreement is subject to approval by the IMF Executive Board, which is expected to meet this month.
Upon completion of the review, Argentina will have access to about US$6 billion (SDR 4.5 billion).
Argentina’s 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.

Macroeconomic assessment and recent program performance

All quantitative performance criteria through end-September 2022 were met.
Fiscal: Primary fiscal deficit outcomes benefited from strong expenditure controls and actions to improve the targeting of subsidies and social assistance.
Debt and financing:
- A debt restructuring agreement was reached with Paris Club creditors.
- Efforts to mobilize net official financing have intensified.
Inflation and trade:
- Inflation is moderating (albeit from high levels).
- Trade balance is improving, largely on account of a healthy slowdown in domestic demand and imports.
Reserves and coverage:
- Reserve coverage is being strengthened.
- Net international reserves are programmed to increase by US$9.8 billion by end-2023.

Key numeric program targets and projections (as stated)

Primary fiscal deficit: reduction from 2.5 percent of GDP in 2022 to 1.9 percent of GDP in 2023.
Annual inflation: gradual reduction from around 95 percent by end-2022 to 60 percent by end-2023.
Net international reserves: programmed increase by US$9.8 billion by end-2023.
Access upon review completion: about US$6 billion (SDR 4.5 billion).
EFF arrangement access: SDR 31.914 billion (equivalent to US$44 billion, or about 1000 percent of quota).

Policy recommendations and conditionalities emphasized

Continue decisive policy implementation to further reduce macroeconomic imbalances, especially given a more challenging external and domestic backdrop (including the war in Ukraine).
Fiscal consolidation:
- Continue the fiscal consolidation process to achieve the targeted reduction in the primary fiscal deficit.
- Underpin consolidation with efforts to continue to mobilize revenue, strengthen expenditure controls, and improve the timely targeting of subsidies and social assistance.
- Preserve space for priority social and infrastructure spending.
Monetary and FX policy:
- Maintain a monetary and FX policy framework that delivers positive real policy interest rates and an improvement in external competitiveness.
- Encourage demand for peso assets and ensure a reduction in monetary financing in line with program targets.
- Support a gradual reduction in annual inflation from around 95 percent by end-2022 to 60 percent by end-2023.
Domestic debt strategy:
- Maintain a proactive domestic debt strategy to mobilize domestic financing and improve market functioning.
External financing and FX measures:
- Continue efforts to mobilize external financing; tighter macroeconomic policies should support further improvement in the current account balance.
- Minimize temporary administrative FX measures going forward, since they are not a substitute for sound macroeconomic policy.
Contingency:
- Policies should be ready to adapt as needed if external and domestic risks materialize.

Structural priorities

Strengthen public financial management.
Develop the peso government debt market.
Improve AML/CFT frameworks.
Enhance the net export potential of strategic sectors, particularly in energy.
Conclude the forthcoming international information exchange agreement with the United States to support revenue mobilization and reserve accumulation.

Other notable points

Actions by the new economic team are starting to bear fruit.
The authorities remain on track to meet the end-2022 program targets.
The IMF team was led by Luis Cubeddu, Deputy Director of the Western Hemisphere Department, and Ashvin Ahuja, Mission Chief for Argentina.

IMF staff and the Argentine Authorities Reach Staff-Level Agreement on the Third Review Under the Extended Fund Facility Arrangement — Press Release No. 22/414 (December 2, 2022)