Press Release: IMF Approves Augmentation of Argentina's Stand-By Credit
IMF News, January 12, 2001
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- Authors: Credit Press Release No.
- Published: January 12, 2001
Approval and Financial Support Package
- The Executive Board approved an augmentation to SDR 10.6 billion (about US$14 billion) of Argentina's stand-by credit first approved on March 10, 2000.
- SDR 2.1 billion (about US$3 billion) of the augmented total will be provided under the Supplemental Reserve Facility (SRF).
- SDR 2.25 billion (about US$3 billion) made available immediately following completion of the second review of Argentina's program.
- Three additional drawings of SDR 976.2 million (about US$1.3 billion) each to be made available during the remainder of 2001 following further reviews, the first expected to take place towards the end of the first quarter.
- Further credit scheduled, according to a schedule yet to be specified:
- 2002: SDR 3 billion (about US$4 billion)
- 2003: SDR 764 million (about US$1 billion)
- Argentine authorities arranged a financial support package totaling about US$39.7 billion from official and private sources, which includes:
- About US$5 billion in new loan commitments from the Inter-American Development Bank and the World Bank.
- US$1 billion in a loan from Spain.
- About US$20 billion of financing from the private sector based on a market-based, voluntary approach.
IMF Statement and Program Objectives
- Stanley Fischer, First Deputy Managing Director and Acting Chairman of the Board, summarized the authorities' program aims:
- Promote economic growth and ensure medium-term sustainability of the fiscal and external financial situations.
- Restore confidence at home and abroad and protect the country's convertibility regime.
- Program measures highlighted:
- Elimination of tax disincentives to promote investment, including phasing out the 15 percent tax on interest paid by enterprises by July 2002.
- Creation of a private sector infrastructure fund and an increase in public investment.
- Structural fiscal reforms including a new fiscal pact with the provinces, reform to the social security system, and measures to improve tax enforcement.
- Opening national health care to competition; deregulation and promotion of competition in energy and telecommunications; renegotiation of expiring contracts with privatized enterprises; elimination over two years of the 3 percent import surcharge; continued implementation of labor reform approved by Congress in May 2000.
- Market reactions noted as positive: spreads on Argentine bonds and domestic interest rates declined significantly in recent weeks and the stock market rebounded strongly.
Program Summary and Projections
- Economic performance in 2000 was worse than expected; failure to recover from the recession since mid-1998.
- Authorities' response: strengthen policy framework, accelerate structural reform efforts, maintain current convertibility regime, and promote recovery of investment as the foundation for domestic demand and output recovery.
- New policy measures to stimulate investment include allowing partial deductibility of interest paid on new mortgage loans.
- Growth and output projections:
- A gradual recovery in demand and output expected to begin in the first quarter of 2001.
- Average rate of GDP growth in 2001 projected at around 2 ½ percent.
- Investment projected to rise by nearly 6 percent in 2001, following a cumulative decline of 20 percent in 1999-2000.
- Consumer prices likely to remain flat reflecting the still large output gap and labor market slack.
- External and fiscal objectives:
- Program aims at gradual reduction of the external account deficit, contributing to lowering external debt to GDP ratio below 50 percent by 2006.
- Authorities accept in the short run an only moderate reduction in the federal fiscal deficit to 2.2 of the projected GDP to avoid a strong contractionary fiscal impact.
- Commitment to medium-term fiscal sustainability: reform of the pension system and a fiscal pact with the provinces to attain budget balance at both the federal and the provincial level by 2005, at the latest.
Argentina: Selected Economic Indicators (Prel.)
- National income and prices (annual percentage change)
- GDP at current prices: 1996: 5.1; 1997: 7.6; 1998: 2.1; 1999: -5.2; 2000: 0.8
- GDP at constant prices: 1996: 5.5; 1997: 8.1; 1998: 3.8; 1999: -3.4; 2000: -0.2
- GDP deflator: 1996: -0.4; 1997: -0.5; 1998: -1.7; 1999: -1.9; 2000: 1.0
- Consumer prices (e.o.p.): 1996: 0.1; 1997: 0.3; 1998: 0.7; 1999: -1.8; 2000: -0.7
- External sector (annual percentage change)
- Export volume: 1996: 6.7; 1997: 13.9; 1998: 11.6; 1999: 3.0; 2000: —
- Import volume: 1996: 19.6; 1997: 30.2; 1998: 4.0; 1999: -13.9; 2000: -1.0
- Terms of trade (deterioration -): 1996: 7.8; 1997: -1.2; 1998: -5.5; 1999: -5.9; 2000: 9.7
- Money and credit (annual percentage change)
- Domestic credit (net): 1996: 9.8; 1997: 17.4; 1998: 10.7; 1999: 3.3; 2000: —
- Private sector deposits: 1996: 22.1; 1997: 27.0; 1998: 15.8; 1999: 2.8; 2000: 7.4
- Interest rates (average)
- 31-60-day peso time deposits: 1996: 7.3; 1997: 7.0; 1998: 8.4; 1999: —
- 30-day peso prime rate: 1996: 10.5; 1997: 9.1; 1998: 10.6; 1999: 10.8; 2000: 11.0
- National accounts (in percent of GDP)
- Gross domestic investment: 1996: 18.1; 1997: 19.4; 1998: 19.9; 1999: 17.9; 2000: 15.9
- Gross national savings: 1996: 15.7; 1997: 15.3; 1998: 15.2; 1999: 13.5; 2000: 12.6
- Public finances (in percent of GDP)
- Federal government primary balance: 1996: -0.8; 1997: 0.4; 1998: 0.9; 1999: —; 2000: —
- Federal government overall balance: 1996: -2.5; 1997: -1.6; 1998: -1.3; 1999: -2.4; 2000: —
- Overall public sector: 1996: -3.2; 1997: -2.1; 1998: -4.2; 1999: -3.6; 2000: —
- Current account (deficit -) and external debt (in percent of GDP)
- Current account (deficit -): 1996: -4.1; 1997: -4.8; 1998: -4.4; 1999: —
- External public debt: 1996: 25.5; 1997: 27.6; 1998: 30.0; 1999: 32.0; 2000: —
- Public sector external debt service1/: 1996: 33.8; 1997: 40.1; 1998: 35.3; 1999: 46.0; 2000: 46.6
- Level and flow indicators (in billions of US dollars, unless otherwise stated)
- GDP (in billions of Arg$): 1996: 272.2; 1997: 292.9; 1998: 299.0; 1999: 283.2; 2000: 285.5
- Unemployment rate (percent): 1996: 17.2; 1997: 14.2; 1998: 12.9; 1999: 15.0; 2000: —
- Exports, f.o.b. (US$ billion): 1996: 24.0; 1997: 26.4; 1998: 23.3; 1999: 26.2; 2000: —
- Imports, c.i.f. (US$ billion): 1996: -23.9; 1997: -30.5; 1998: -31.4; 1999: -25.5; 2000: -25.3
- Current account of balance of payments (US$ billion): 1996: -6.4; 1997: -12.0; 1998: -14.3; 1999: -12.4; 2000: -9.9
- Overall balance of payments (US$ billion): 1996: 3.4; 1997: 3.6; 1998: 4.2; 1999: 1.8; 2000: —
- Membership and IMF exposure
- Argentina joined the IMF on September 20, 1956.
- Its quota is SDR 2.117 billion (about US$3 billion).
- Its outstanding use of IMF credit currently totals SDR 2.232 billion (about US$3 billion).
International Monetary Fund press release, January 12, 2001.