Washington, DC:
The Executive Board of the International Monetary Fund (IMF) approved today
a 30-month extended arrangement under the Extended Fund Facility (EFF) for
Argentina amounting to SDR 31.914 billion (equivalent to US$44 billion
[1]
, or 1000 percent of quota) and concluded the 2022 Article IV Consultation.
[2]
The Executive Board’s decision allows the authorities an immediate
disbursement of SDR 7.0 billion, equivalent to US$9.656 billion. The EFF
arrangement aims to provide Argentina with balance of payments and budget
support that is backed by measures designed to strengthen debt
sustainability, tackle high inflation, boost reserves, address the
country’s social and infrastructure gaps and promote inclusive growth.
The authorities’ IMF-supported program, which was recently approved by the
Argentine National Congress, aims to strengthen
public finances and start reducing persistently high inflation through a
multi-pronged strategy involving a gradual elimination of monetary
financing of the fiscal deficit and an enhanced monetary and exchange rate
policy framework. The program also envisages steps to strengthen the
domestic peso debt market, the effectiveness of government spending, labor
and gender inclusion, and the competitiveness of key sectors.
Following the Executive Board discussion, Ms. Kristalina Georgieva,
Managing Director and Chair, made the following statement:
“While an economic and employment recovery is underway, Argentina continues
to face exceptional economic and social challenges, including depressed per
capita income, elevated poverty levels, persistent high inflation, a heavy
debt burden, and low external buffers. Against this backdrop, the
authorities’ economic program sets pragmatic and realistic objectives,
along with credible policies to strengthen macroeconomic stability and
begin to address Argentina’s deep-seated challenges. Important financial
commitments secured from Argentina’s international partners will support
the authorities’ reform efforts and improve the country’s external buffers.
Strong political and social consensus is key to sustain the implementation
of the reform agenda, including over the medium term, which is essential to
address the country’s long-standing vulnerabilities.
“The program contains a carefully calibrated set of economic policies. A
sustained and growth-friendly fiscal consolidation will strengthen debt
sustainability and allow for the elimination of the monetary financing of
the fiscal deficit, which will help to start tackling persistent and high
inflation. In addition, an enhanced monetary and exchange rate framework
delivering positive real interest rates and a competitive real exchange
rate will help support the demand for peso assets and improve reserve
coverage. These actions will help pave the way for an eventual,
conditions-based, easing of foreign exchange controls.
“Importantly, the program includes policies to strengthen the domestic peso
debt market, enhance the effectiveness and transparency of government
spending, promote labor and gender inclusion, and improve the
sustainability and efficiency of key sectors.
“Risks to the program are exceptionally high and spillovers from the war in
Ukraine are already materializing. In this context, early program
recalibration, including the identification and adoption of appropriate
measures, as needed, will be critical to achieve the program’s objectives.”
Executive Board Assessment
[3]
Executive Directors broadly agreed with the thrust of the staff appraisal.
Noting the fragile economic, financial, and social situation in Argentina,
which has been aggravated by the pandemic and, more recently, by the
spillovers from the war in Ukraine, Directors supported the Argentine
authorities’ request for an Extended Arrangement under the Fund’s Extended
Fund Facility. They underscored that strong ownership as well as sustained
and steadfast implementation of the authorities’ program will be critical
to strengthen economic stability and begin to address Argentina’s
deep-seated challenges.
Directors emphasized that a credible, sustained, and growth-friendly fiscal
consolidation is key to strengthen debt sustainability and discontinue
monetary financing of the fiscal deficit. They stressed the need to improve
the efficiency and fairness of, and compliance with, the tax system.
Directors called for improvements in the structure of spending, including
by reducing costly and untargeted energy subsidies while expanding
infrastructure spending. They stressed the need for protecting
well-targeted social assistance programs and for a prudent management of
the wages and pensions.
Directors underscored the criticality of reducing persistent high inflation
and rebuilding international reserves. To support this, they stressed the
importance of ending monetary financing and implementing the enhanced
monetary policy framework to deliver positive real interest rates and
encourage peso demand. Directors underscored the importance of maintaining
a competitive real exchange rate and adapting the capital flow management
framework—over time and as conditions permit—to secure trade surpluses,
encourage long term inflows, and boost reserve accumulation, which would
enable an eventual re access to international capital markets.
Directors called for structural reforms that address Argentina’s
long-standing structural vulnerabilities. They emphasized the importance of
strengthening the domestic peso debt market; enhancing the sustainability
and efficiency of key sectors, including energy; and promoting labor and
gender inclusion. Directors stressed the need to strengthen the investment
climate by gradually removing economic distortions and providing a more
predictable regulatory framework, including in strategic sectors. They also
called for improving governance, including by boosting the efficiency and
transparency of public spending and reinforcing the AML/CFT regime.
Directors agreed that the program is subject to exceptionally high risks.
They recognized Argentina’s vulnerability to external shocks and
implementation difficulties given the complex social and political
situation. Noting that the spillovers from the war in Ukraine are
materializing, Directors welcomed the authorities’ agreement to bring
forward the first review of the program and urged them to recalibrate
policies, as needed, to secure the fiscal objectives and contain
second-round inflationary effects from rising commodity prices.
Directors noted that the elevated exposure to Argentina over an extended
period creates major financial and reputational risks for the Fund. As
these risks cannot be fully mitigated through program design and
contingency planning, Directors agreed that finely balanced judgements will
be needed when assessing difficult tradeoffs that are likely to arise
during the life of the program.
Directors concurred that beyond the program period, further efforts will be
required to cement stability and address longstanding structural
challenges. In particular, they agreed that over the medium term, Argentina
will need to further strengthen debt sustainability, bolster the central
bank’s balance sheet and its governance framework, and tackle regulatory
barriers to productivity, investment, and formal employment. Some Directors
called on the authorities to incorporate some of these reforms in the
current program to increase its credibility.
|
Argentina: Selected Economic and Financial
Indicators
|
|
Population (2013): 41.5
million Quota (current;
millions SDR / % total):
2,117 / 0.89 Main products
and exports: soybeans,
automobiles, corn
|
|
|
Per capita GDP (2014):
US$12,873 Gini coefficient
(2011): 0.45
|
|
|
Est.
|
Proj.
|
|
|
2021
|
2022
|
2023
|
|
|
|
|
|
|
|
(Annual percentage change)
|
|
National income and prices
|
|
|
|
|
GDP at constant prices
|
10.2
|
3.5 - 4.5
|
2.5 - 3.5
|
|
Consumer price index (eop)
|
50.9
|
38.0 - 48.0
|
34.0 - 42.0
|
|
|
(Percent of GDP unless otherwise indicated)
|
|
|
|
|
|
|
External sector
|
|
|
|
|
Current account balance
|
1.3
|
0.5
|
0.4
|
|
Trade balance
|
3.2
|
2.4
|
2.3
|
|
Foreign direct Investment (net)
|
1.1
|
1.3
|
1.6
|
|
Gross international reserves (US$ billions)
|
39.7
|
49.1
|
51.5
|
|
Change in Net International Reserves (US$ billions) 1/
|
-1.5
|
5.8
|
4.0
|
|
Terms of trade (percent change)
|
9.4
|
-0.1
|
-4.1
|
|
REER (avg., percent change)
|
4.3
|
…
|
…
|
|
|
|
|
|
|
|
|
|
|
|
Federal government operations
|
|
|
|
|
Federal primary balance 2/
|
-3.0
|
-2.5
|
-1.9
|
|
Revenues
|
18.2
|
18.2
|
18.6
|
|
Primary expenditures
|
21.2
|
20.7
|
20.5
|
|
Federal overall balance
|
-4.5
|
-4.0
|
-3.4
|
|
Federal government debt
|
80.6
|
74.4
|
74.3
|
|
excluding intra public sector 3/
|
49.6
|
47.8
|
49.4
|
|
|
|
|
|
|
Monetary operations
|
|
|
|
|
Monetary base
|
7.9
|
7.5
|
7.5
|
|
Monetary financing of the fiscal deficit
|
3.7
|
1.0
|
0.6
|
|
BCRA securities
|
10.9
|
9.3
|
9.1
|
|
BCRA quasi-fiscal cost
|
3.3
|
3.3
|
2.9
|
|
|
|
|
|
|
Sources: National authorities and Fund staff estimates and
projections.
|
|
|
|
1/ TMU definition.
2/ Primary balance excludes BCRA profit transfers.
3/ Excludes federal government debt held by the BCRA and
the Social Security Fund (FGS).
|
[1]
US dollar amounts have been calculated using today’s exchange rate:
(SDR 0.724951/US$).
[2]
Under Article IV of the IMF's Articles of Agreement, the IMF holds
bilateral discussions with members, usually every year. A staff
team collects economic and financial information, and discusses
with officials the country's economic developments and policies.
The staff prepares a report, which forms the basis for discussion
by the Executive Board.
[3]
At the conclusion of the discussion, the Managing Director, as
Chairman of the Board, summarizes the views of Executive Directors,
and this summary is transmitted to the country's authorities. An
explanation of any qualifiers used in summings up can be found
here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.