Transcript of the IMF Virtual Press Briefing on the IMF and Argentine Authorities Staff-level Agreement on an Extended Fund Facility (EFF)
IMF News, March 3, 2022
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- Published: March 3, 2022
Program overview
- Staff-level agreement reached on an Extended Fund Facility (EFF) program with Argentina; program described as "pragmatic, realistic" and aimed at strengthening macroeconomic stability and addressing deep-rooted challenges to sustainable growth.
- Requested IMF access: $45 billion.
- Next procedural steps:
- Memorandum of Economic and Financial Policies and related documents will be sent to the Argentine National Congress (legislative consideration required by Argentine domestic law).
- IMF Executive Board will consider the request after the Argentine Congress deliberation (Executive Board has been briefed informally).
Monetary policy and inflation strategy
- Multi-pronged strategy to address persistent, high inflation includes:
- Reduction of monetary financing of the fiscal deficit.
- New framework for monetary policy implementation to deliver positive real interest rates to support domestic financing.
- Expected effect: a steady decline in inflation over time, conditional on anchoring expectations and reducing inflation inertia.
Inflation and GDP projections
- Inflation:
- End-of-period inflation in 2021: close to 51 percent.
- Projected for 2022: a range of between 38 and 48 percent.
- Additional decline of 5 percentage points from the 2022 level projected in '23, '24 in the medium-term.
- GDP / Growth:
- 2021: growth ended a bit over 10 percent (post-pandemic recovery).
- 2022: growth expected to converge to a range of three and a half to four and a half percent.
- Medium term: slowing further to a mid-point of three percent and over the medium term closer to two percent (Argentina's historical average).
- Projections framed as ranges with acknowledged uncertainty due to unanchored inflation expectations and other risks.
Fiscal path and public finance measures
- Agreed primary fiscal deficit path:
- 2022: primary fiscal deficit of 2.5 percent of GDP
- 2023: primary fiscal deficit of 1.9 percent of GDP
- 2024: primary fiscal deficit of 0.9 percent of GDP
- 2025: primary fiscal deficit of 0
- Fiscal strategy elements:
- Balanced revenue policies emphasizing progressivity, efficiency, and compliance.
- Expenditure reforms to reduce untargeted subsidies and reorient spending toward productive social and infrastructure investment to support recovery and debt sustainability.
- Reduction in monetary financing expected to help fiscal consolidation.
Energy subsidy reduction
- Targeted reduction in energy subsidies: 0.6 percent of GDP.
- Design and implementation:
- Reduction to be progressive (higher elimination for those with higher payment capacity; protection for lower-income segments).
- Combination of cost-side measures and tariff increases implemented progressively.
- Cost-side measures include actions such as plan gas initiatives and improving energy sector efficiency and conservation.
- Joint work with the World Bank to develop a medium-term plan for the energy sector.
- Baseline considerations and risks:
- The 0.6 percent of GDP reduction is underpinned by assumptions on global energy prices and potential improvements in hydroelectricity; baseline projections are subject to risks tied to energy price evolution and Argentina's LNG imports.
Currency controls, easing, and disbursement sequencing
- Currency controls:
- Program aims to improve the framework for currency controls to strengthen reserve accumulation and create conditions for an easing of controls over time.
- Transition envisaged toward macroprudential regulation as controls are eased.
- Disbursements:
- Schedule of requested disbursements will be included in program documents and is subject to IMF Executive Board approval.
- No specific first-disbursement amounts were published during the briefing; schedule will be detailed in the memorandum.
External financing and multilateral support
- Multilateral development banks (MDBs) involvement:
- Engagements with IDB, World Bank, CAF to secure financing assurances and technical support (energy, social protection).
- Expected MDB contribution: approximately 0.4 percent of GDP annually over the course of the program (net basis).
- Note: 0.4 percent of GDP is net, implying larger gross flows and subsequent repayments.
Political and procedural considerations
- Documents publication timing:
- Memorandum and accompanying documents will be published when they are sent to the Argentine Congress (unusual sequencing due to domestic law).
- Congressional approval:
- Program presentation to the IMF Executive Board follows Congressional consideration; IMF staff expressed confidence in authorities' political support but did not comment on domestic politics.
- Timing risks:
- Authorities and IMF staff are working to complete Congressional consideration in time to meet upcoming debt-service dates; potential delays were discussed but no waivers or specific contingency mechanisms were detailed in the briefing.
Q&A highlights and key messages
- Program rationale and credibility:
- IMF staff emphasized realistic goals, pragmatism, and ownership by Argentine authorities as reasons the program should yield different results than past arrangements.
- Revenue-side measures:
- Continued revenue measures and tax compliance efforts are expected to support deficit targets; specific changes to export duties were not detailed.
- Transparency and publication:
- Full program documents will be published upon transmission to the Argentine Congress.
Transcript of the IMF Virtual Press Briefing on the IMF and Argentine Authorities Staff-level Agreement on an Extended Fund Facility (EFF), March 3, 2022 — IMF Communications Department