{
  "title": "Press Release: IMF Approves Extension, for Fourth Year, of EFF Credit to Argentina",
  "publication": "IMF News, April 6, 1995",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/14/01/49/pr9518",
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  "summary": "The IMF approved Argentina's request to extend to a fourth year the extended Fund facility (EFF) credit for Argentina.",
  "publishDate": "1995-04-06",
  "sections": [
    {
      "heading": "IMF approval and financing details",
      "content": "- The IMF approved Argentina's request to extend to a fourth year the extended Fund facility (EFF) credit for Argentina.\n- The amount of the EFF credit was increased by SDR 1,537.1 million (about $2,407 million), to a total of SDR 4,020.25 million (about $6,295 million).\n- Together with the undrawn amount of SDR 278.05 million (about $435 million) under the third year of the EFF credit, a total of SDR 1,046.6 million (about $1,639 million) is immediately available to Argentina.\n- The remaining SDR 768.55 million (about $1,203 million) will be disbursed in three equal, quarterly installments.\n- The IMF had approved the three-year EFF of SDR 2,483.15 million (about $3,888 million) on March 31, 1992 in support of Argentina's medium-term economic and financial program."
    },
    {
      "heading": "Background and recent macroeconomic developments",
      "content": "- Under the Convertibility Plan adopted in March 1991, Argentina:\n  - pegged the peso to the U.S. dollar,\n  - allowed the U.S. dollar to be used for most transactions,\n  - eliminated indexation,\n  - prohibited the Central Bank from providing domestic credit beyond certain limits.\n- Fiscal accounts were kept in approximate balance and extensive structural reforms were implemented in fiscal, monetary and trade areas, including opening up the economy to competition, deregulation and privatization.\n- Real economic growth averaged more than 7 percent a year between 1991 and 1994, boosted by large capital inflows.\n- Inflation dropped from very high levels to less than 4 percent in 1994.\n- There was an increase in the external current account deficit, mainly financed by private capital inflows.\n- The 1994 program, supported by the EFF, aimed at reducing inflation further and lowering the external current account deficit via stronger fiscal policy; however:\n  - economic growth was more robust than programmed,\n  - fiscal policy was weaker than expected due to a faster-than-programmed reduction in employer social security contributions and expenditure overruns, mainly in pensions.\n- In early 1995, following the Mexican crisis, Argentina experienced large capital outflows that led to:\n  - a substantial decline in both the Central Bank's international reserves and its monetary liabilities between end-December 1994 and end-March 1995,\n  - a tightening of bank liquidity,\n  - a surge in interest rates,\n  - a sharp fall in asset prices,\n  - difficulties in parts of the banking system and declines in bank deposits.\n- Authorities took measures in early March to reinforce public finances and to provide resources for restructuring the financial system by creating two Trust Funds to provide lender-of-last-resort facilities and sought large-scale international financial support, including the EFF extension."
    },
    {
      "heading": "The 1995 program: objectives and macroeconomic projections",
      "content": "- Objectives:\n  - restore liquidity in the financial sector,\n  - raise domestic savings,\n  - re-establish confidence in the Government's ability to defend the fixed exchange rate under the Convertibility Plan.\n- Program assumptions and projections:\n  - economic growth slowdown to 2-3 percent,\n  - inflation of 3 1/2 percent,\n  - current account deficit projected to narrow to 2 percent of GDP.\n- Fiscal and revenue measures to generate an overall surplus in the nonfinancial public sector amount to some 2 3/4 percentage points of GDP on a full-year basis and include:\n  - a temporary 3- percentage point increase in the value-added tax rate to 21 percent,\n  - varying increases in import duties,\n  - a broadening of the tax base,\n  - a reform of the wealth tax,\n  - a unification of employer social security contributions rates across sectors,\n  - improvements in tax administration.\n- Expenditure cuts, mainly on current outlays, have also been made.\n- The monetary program for 1995 foresees a reversal of the decline in bank deposits during the remainder of the year."
    },
    {
      "heading": "Structural policies and privatization",
      "content": "- Further steps are envisaged in privatization, labor market reform, and bankruptcy law to build on prior reforms.\n- Privatization plans include outright sales or operating concessions for:\n  - a number of hydroelectric dams,\n  - nuclear power installations,\n  - petrochemical plants,\n  - these sales/concessions are estimated to raise $1 billion.\n- Sales of shares in other enterprises are valued at some $1.4 billion.\n- Legislation has recently been passed to enhance labor market flexibility to address unemployment and improve international competitiveness."
    },
    {
      "heading": "Assessment and policy implications (Challenge Ahead)",
      "content": "- The decisive measures taken by the authorities, shortly ahead of national elections, are presented as demonstrating full commitment to maintaining the Convertibility Plan.\n- These measures are expected to be adequate to re-establish financial stability, restore confidence, and ensure the program's success.\n- Argentina joined the IMF on September 20, 1956, and its quota is SDR 1,537.1 million (about $2,407 million).\n- Argentina's outstanding use of IMF credit currently totals SDR 2,821 million (about $4,417 million)."
    },
    {
      "heading": "Key statistics — Argentina: Selected Economic Indicators",
      "content": "- Real economic growth (percent change):\n  - 1991: 8.9\n  - 1992: 8.7\n  - 1993: 6.0\n  - 1994: 7.1\n  - 1995: 2.0–3.0\n- Consumer prices (end of period):\n  - 1991: 84.0\n  - 1992: 17.5\n  - 1993: 7.4\n  - 1994: 3.9\n  - 1995: 3.6\n- External current account balance (deficit –) (percent of GDP):\n  - 1991: –0.2\n  - 1992: –2.8\n  - 1993: –2.9\n  - 1994: –3.7\n  - 1995: –2.0\n- Overall balance of the nonfinancial public sector, including privatization (deficit –) (percent of GDP):\n  - 1991: –0.8\n  - 1992: 0.7\n  - 1993: 2.1\n  - 1994: 0.1\n  - 1995: 1.5\n- Gross official reserves (months of imports):\n  - 1991: 8.6\n  - 1992: 9.7\n  - 1993: 9.3\n  - 1994: 9.1\n\nPreliminary.\nProgram.\n\nPress Release No. 95/18 — IMF External Relations Department, April 6, 1995.\n\n---\n\n\n References\n\n- Argentina and the IMF\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr9518"
    }
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    "Published: April 6, 1995",
    "The IMF approved Argentina's request to extend to a fourth year the extended Fund facility (EFF) credit for Argentina.",
    "The amount of the EFF credit was increased by SDR 1,537.1 million (about $2,407 million), to a total of SDR 4,020.25 million (about $6,295 million).",
    "Together with the undrawn amount of SDR 278.05 million (about $435 million) under the third year of the EFF credit, a total of SDR 1,046.6 million (about $1,639 million) is immediately available to Argentina.",
    "The remaining SDR 768.55 million (about $1,203 million) will be disbursed in three equal, quarterly installments.",
    "The IMF had approved the three-year EFF of SDR 2,483.15 million (about $3,888 million) on March 31, 1992 in support of Argentina's medium-term economic and financial program.",
    "Under the Convertibility Plan adopted in March 1991, Argentina:",
    "Fiscal accounts were kept in approximate balance and extensive structural reforms were implemented in fiscal, monetary and trade areas, including opening up the economy to competition, deregulation and privatization.",
    "Real economic growth averaged more than 7 percent a year between 1991 and 1994, boosted by large capital inflows.",
    "Inflation dropped from very high levels to less than 4 percent in 1994.",
    "There was an increase in the external current account deficit, mainly financed by private capital inflows.",
    "The 1994 program, supported by the EFF, aimed at reducing inflation further and lowering the external current account deficit via stronger fiscal policy; however:",
    "In early 1995, following the Mexican crisis, Argentina experienced large capital outflows that led to:",
    "Authorities took measures in early March to reinforce public finances and to provide resources for restructuring the financial system by creating two Trust Funds to provide lender-of-last-resort facilities and sought large-scale international financial support, including the EFF extension.",
    "Objectives:",
    "Program assumptions and projections:",
    "Fiscal and revenue measures to generate an overall surplus in the nonfinancial public sector amount to some 2 3/4 percentage points of GDP on a full-year basis and include:",
    "Expenditure cuts, mainly on current outlays, have also been made.",
    "The monetary program for 1995 foresees a reversal of the decline in bank deposits during the remainder of the year.",
    "Further steps are envisaged in privatization, labor market reform, and bankruptcy law to build on prior reforms.",
    "Privatization plans include outright sales or operating concessions for:",
    "Sales of shares in other enterprises are valued at some $1.4 billion.",
    "Legislation has recently been passed to enhance labor market flexibility to address unemployment and improve international competitiveness.",
    "The decisive measures taken by the authorities, shortly ahead of national elections, are presented as demonstrating full commitment to maintaining the Convertibility Plan.",
    "These measures are expected to be adequate to re-establish financial stability, restore confidence, and ensure the program's success.",
    "Argentina joined the IMF on September 20, 1956, and its quota is SDR 1,537.1 million (about $2,407 million).",
    "Argentina's outstanding use of IMF credit currently totals SDR 2,821 million (about $4,417 million).",
    "Real economic growth (percent change):",
    "Consumer prices (end of period):",
    "External current account balance (deficit –) (percent of GDP):",
    "Overall balance of the nonfinancial public sector, including privatization (deficit –) (percent of GDP):",
    "Gross official reserves (months of imports):",
    "[Argentina and the IMF](http://www.imf.org/external/country/ARG/index.htm)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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