IMF Executive Board Completes the Combined Fifth and Sixth Reviews of the Extended Arrangement Under the Extended Fund Facility for Argentina

August 23, 2023

  • The IMF Executive Board completed today the fifth and six reviews of Argentina’s 30-month Extended Fund Facility (EFF). The Board’s decision enables an immediate disbursement of around US$7.5 billion.
  • Since completion of the fourth review, key program targets were missed reflecting the historic drought along with policy slippages. Against the backdrop of high inflation and rising balance of payments pressures, agreement was reached on a new policy package centered on rebuilding reserves and enhancing fiscal order.
  • Continued strong policy implementation will be critical in the period ahead to safeguard stability and strengthen medium-term sustainability.

Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed today the fifth and six reviews of the extended arrangement under the Extended Fund Facility (EFF) for Argentina. The Board’s decision enables an immediate disbursement of around US$7.5 billion (SDR 5.5 billion), bringing total disbursements under the arrangement to about US$36 billion. [1] The next review is scheduled for November 2023.

In completing the combined reviews, the Executive Board assessed that key program targets were missed through end-June 2023 on account of the historic drought along with policy slippages, requiring the approval of waivers of nonobservance. In addition, the Board approved waivers of non-observance associated with the introduction of temporary measures that gave rise to introduction or intensification of exchange restrictions and multiple currency practices. Modifications to the reserve accumulation target, as well as to the primary fiscal balance and monetary financing of the deficit targets, were also approved alongside a commitment to implement a new policy package to correct policy setbacks, safeguard stability, and secure program objectives.

At the conclusion of the Executive Board’s discussion, Ms. Kristalina Georgieva, Managing Director and Chair made the following statement:

“The economic situation has become increasingly challenging since the completion of the Fourth review, on account of the historic drought along with policy slippages, causing key program targets to be missed through end-June. Against the backdrop of high inflation and balance of payments pressures, the authorities are implementing a new policy package to safeguard stability and underpin medium-term sustainability centered on rebuilding reserves and enhancing fiscal order. 

“Achieving the agreed primary fiscal deficit target of 1.9 percent of GDP this year remains essential to support economic and financial stability. Efforts are focused on strengthening expenditure controls through upfront measures to update energy tariffs and contain public wages and pensions, while protecting priority social and infrastructure spending. These actions are being complemented by temporary increases in FX taxes on selected goods and services to also help offset the loss of drought-related export receipts. 

“The recent realignment of the exchange rate, coupled with the tightening of monetary policy, should continue to help support reserve accumulation while limiting the exchange rate passthrough to inflation. Going forward, the rate of crawl will be carefully calibrated to help achieve reserve accumulation and disinflation goals, while real interest rates will remain sufficiently positive to continue to support demand for peso assets. Interventions in the securities and futures FX market will also be limited and temporary, focused on addressing disorderly conditions. Meanwhile, multiple currency practices, exchange restrictions, and capital flow management measures will be unwound gradually as soon as conditions permit, as they are not a substitute for sound macroeconomic policy. 

“Beyond this year, it was agreed that fiscal consolidation would accelerate through high quality revenue and expenditure measures. This will help eliminate monetary financing of the deficit, support disinflation, and strengthen the central bank’s balance sheet. There was recognition of the importance to boost Argentina’s export potential and reserves, and that completion of the first phase of the gas pipeline was a welcome development. Attention will continue to be given to protecting the poor and supporting inclusive growth as imbalances are addressed. 

“Decisive program implementation, agile policymaking, and contingency planning remain imperative, and further measures may be needed to achieve program objectives and safeguard stability. Meanwhile, broad political support and program ownership remain critical in the near and medium term, as resolving the country’s deep challenges will require continued efforts by future administrations. Argentina’s continued commitment to remain current on its financial obligations to the Fund is welcomed.”

[1] Argentina’s 30-month EFF arrangement, with access of SDR 31.914 billion (equivalent to around US$44 billion, or about 1000 percent of quota), was approved on March 25, 2022 (see Press Release No. 22/89).

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