IMF Staff Concludes Third Review Mission to Argentina

IMF News, March 18, 2019

Source details

An IMF mission led by Mr. Roberto Cardarelli visited Argentina during February 11–22, 2019 to conduct discussions on the Third Review of Argentina’s IMF-supported program under the Stand-By Arrangement (SBA).
Talks continued in Washington DC after the end of the mission.
The statement was issued March 18, 2019 by the IMF Communications Department.

Subject to the approval of the Executive Board, Argentina would have access to about US$10.87 billion (equivalent to SDR 7.8 billion).
The dollar-SDR exchange rate applied to this conversion is 1 US$ = SDR 0.717402.
The Executive Board’s review is expected in the coming weeks.

The authorities’ policy efforts and determination to address macro-economic imbalances and advance their economic stabilization plan were commended.
The high fiscal and external deficits—identified as the two imbalances at the heart of the 2018 financial crisis—are in the midst of a significant correction.
Economic activity has been weak but there are prospects for a gradual recovery.
Monthly inflation remains high and breaking inflation inertia will be a lengthy process.

Staff welcomes the authorities’ decision to extend the zero-base money growth until November.
Staff welcomes the authorities’ decision to lessen the pace at which the edges of the non-intervention zone will increase.
The tightened monetary framework is expected to contribute to bringing down inflation and re-anchoring inflation expectations.
The Central Bank’s cautious approach to monetary base targeting was supported.

The authorities met their 2018 primary deficit target.
Achieving a zero primary deficit in 2019 will require further restraint in government spending.
Efforts to achieve fiscal restraint are intended to place Argentina’s debt-to-GDP on a decisive downward path.
It will be critical that high-impact social spending programs are preserved during the course of this year and beyond.
The mission strongly supports efforts to mitigate the social impact of stabilization policies, including through recently announced increases in social spending.
The program will accommodate these increases through an increase in the adjustor for social assistance spending from 0.2 to 0.3 percent of GDP.

Staff is supportive of the government’s plan to undertake transparent, pre-announced daily FX auctions of US$60 million per day that start in mid-April to meet the federal government’s fiscal spending needs of US$ 9.6 billion.
Insofar as the currency is more appreciated than the central bank’s non-intervention zone, sales will be made directly to the central bank in the amount consistent with its announced unsterilized FX purchase policy.
The authorities’ strategy will allow for a smooth utilization of IMF budget support.

Continued steadfast implementation of the Argentine government’s stabilization plan remains essential to:
- solidify Argentina’s return to macroeconomic stability,
- lower inflation,
- lay the ground for strong, equitable, and sustainable growth.
A new impetus for supply side reforms will be needed to consolidate gains and ensure a sustained improvement in living standards.

The mission met with the Minister of the Economy Nicolas Dujovne, the Governor of the Central Bank Guido Sandleris, as well as other government officials and members of the private sector and civil society.
The mission team thanked the authorities and all other interlocutors for their warm welcome, constructive dialogue, and cooperative spirit.

Source: IMF press release, March 18, 2019.