IMF Executive Board Discusses the Ex-Post Evaluation of Argentina’s Exceptional Access Under the 2022 Extended Fund Facility
IMF News, January 10, 2025
Source details
- Canonical URL
- IMF Executive Board Discusses the Ex-Post Evaluation of Argentina’s Exceptional Access Under the 2022 Extended Fund Facility
Other formats
Bibliographic details
- Published: January 10, 2025
Overview
- Event: Executive Board met to discuss the Ex-Post Evaluation (EPE) of Argentina’s exceptional access under the 2022 extended arrangement under the Extended Fund Facility (2022 EFF).
- Date on page: January 10, 2025.
- The 2022 EFF expired at the end of 2024.
- EPE requirement: In all cases of exceptional access, the EPE assesses whether the macroeconomic strategy, program design, and financing under the 30-month EFF arrangement approved by the Executive Board in March 2022 (Press release No. 22/89) were appropriate and in line with Fund policies.
- The EPE report includes an appendix with the authorities’ reactions and views on the 2022 EFF.
Context and Rationale for the 2022 EFF
- Argentina was unable to regain external viability under the 2018 Stand-By Arrangement.
- Repurchase obligations to the Fund totaled about US$ 35 billion in 2022-23.
- Macro and fiscal challenges cited: high inflation, a significant budget deficit, low international reserves, and elevated public debt.
- Risk noted: The inability to meet obligations falling due to the Fund could have led to severe and protracted consequences for Argentina, significant reputational implications to the Fund, and financial costs for the Fund and its members.
Main EPE Findings
- Overall assessment: The design of the 2022 EFF did not provide for an adjustment commensurate with the scale of Argentina’s fiscal and balance of payments (BoP) problems.
- Contributing factors identified:
- A gradualist reform strategy in a country with severely limited access to financial markets.
- Large adverse shocks and progressively weaker policy implementation.
- Challenging post-COVID conjuncture and the need to secure ownership by a reluctant government.
- Outcomes: Results in 2022-23 fell well short of what was envisaged at the time of program approval.
- Partial successes:
- A major course correction by the Milei government—specifically a sharp fiscal consolidation, an upfront devaluation, and an end to monetary financing of the budget—helped avert a full-blown crisis and made important strides toward macroeconomic stabilization.
- The 2022 EFF eased Argentina’s financial obligations to the Fund by rescheduling repayments over 2026-34.
- Net judgment: The 2022 EFF did not achieve its original macroeconomic objectives, but it may have helped Argentina avoid even worse outcomes in 2022-23.
Executive Board Assessment
- Directors welcomed the comprehensive EPE of Argentina’s exceptional access to Fund financing under the 2022 EFF.
- Regret that the 2022 EFF did not achieve its objectives, while acknowledging difficult trade-offs and that rescheduling likely helped avoid worse outcomes.
- Key criticisms:
- Program design did not provide for an adjustment commensurate to the scale of the problem and risks.
- Reliance on a technical reading that individual elements (capacity-to-repay descriptors, the exceptional access criteria, and strength of program design) were satisfied rather than a holistic view of how the Fund’s resources were safeguarded.
- Enterprise risk management (ERM) policies were evolving during the period; risks could have been assessed and managed earlier to allow broader and deeper Board discussions on mitigation options.
- Noted developments since program approval:
- Course correction and significant shift in ownership toward macroeconomic stabilization achieved since December 2023.
- Outcomes were substantially worse than the baseline by end‑2023 due to the combination of factors noted above.
- Directors’ views on policy framework and options:
- The experience demonstrates that the Fund’s current lending policy framework may not be perfectly suited to deal with cases of large and concentrated Fund exposures.
- Some Directors expressed reservations about alternative policy options, such as postponement of obligations to the Fund.
- Broad support for early and comprehensive enterprise risk discussions with the Board in such cases.
- General agreement on the need to explore alternative approaches where resolution of a deeply entrenched BoP problem may not be feasible through a single arrangement, with a few Directors expressing reservations.
Lessons, Areas for Further Reflection, and Policy Recommendations
- Areas highlighted for further reflection:
- Suitability of the Fund’s lending policy framework to deal with high and concentrated exposure cases and when resolution of a deeply entrenched BoP problem may not be feasible through a single Fund arrangement.
- Need for clearer commitments on specific contingency plans when implementation risks are high.
- Role that assessments of countries’ capacity to repay should play in guiding the design of program safeguards.
- The role and timing of enterprise risk management (ERM) and early Board engagement on risks and mitigation.
- Provision of technical assistance to facilitate debt restructuring outside of a Fund-supported program.
- Practice of repeatedly approving program reviews on the basis of “temporary” FX control measures.
- How the Fund and its shareholders deal with political pressure.
- Importance of effective external communications.
- Directors urged that findings from this and previous EPEs inform ongoing discussions on a potential follow-up program with Argentina.
Press Release No. 25/001 — IMF Communications Department, January 10, 2025.