IMF Executive Board Completes Second Review Under Argentina’s Stand-By Arrangement, Approves US$7.6 Billion Disbursement
IMF News, December 19, 2018
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- Published: December 19, 2018
Review outcome and disbursement
- The Executive Board completed the second review of Argentina’s economic performance under the 36-month Stand-By Arrangement that was approved on June 20, 2018.
- Completion of the review allows the authorities to draw the equivalent of SDR 5.50 billion (about US$ 7.6 billion), bringing total purchases since June to SDR 20.21 billion (about US$ 28.09 billion).
- The Executive Board approved the authorities’ request for modification of performance criterion.
Economic assessment and outlook
- “There are early signs that the redesigned economic reform program, including a new monetary policy framework, is yielding results. The peso has stabilized and inflation, though still high, has started to decline, as the pass-through from past peso depreciation is waning.”
- “Nevertheless, the Argentine economy is still contracting and remains vulnerable to shifts in market sentiment. Economic activity is expected to start recovering in the second quarter of 2019.”
Fiscal policy, social protection, and budget
- “The passage of the 2019 budget with broad political support has helped to solidify confidence in the authorities’ economic reform plan and policy continuity.”
- “Fiscal discipline created space for one-off payments that helped shield the most vulnerable from the burden of adjustment.”
- Policy priorities emphasized:
- Continue safeguarding fiscal targets against implementation challenges and weaker-than-expected revenue collection.
- Maintain social spending as a key priority.
- Further progress needed to improve the medium-term fiscal framework and debt management.
Monetary policy and central bank measures
- “Continued commitment to the zero growth in base money and to the market-determined exchange rate will further strengthen the credibility of the monetary policy framework, re-anchor inflation expectations, and enhance the economy’s resilience to external shocks.”
- “Preparations are ongoing to recapitalize the central bank and enhance its operational independence.”
Structural reform priorities to boost medium-term growth
- As stability returns, the IMF highlights the need to pivot toward boosting medium-term growth through structural reforms, including:
- Boost investment and productivity.
- Increase the employability of women, youth, and lower-income workers.
- Provide greater support to those in poverty.
- Improve the efficiency of social spending while expanding coverage of the social safety net.
- Continue removing distortions in the tax system.
- Improve labor market regulations.
- Put the pension system on a sustainable financial footing.
- Strengthen governance.
Concluding emphasis
- “Continued steadfast implementation of the stabilization plan will be essential to reassure domestic and international investors, solidify Argentina’s return to macroeconomic stability, and durably improve the living standards for all Argentines.”
Press Release No. 18/485, December 19, 2018.
