Washington, DC:
An International Monetary Fund (IMF) team, led by Luis Cubeddu, Deputy
Director of the Western Hemisphere Department and Ashvin Ahuja, Mission
Chief for Argentina, conducted in-person and virtual meetings with the
Argentine authorities to discuss policies on the fourth review of the
extended arrangement under the Extended Fund Facility (EFF).
[1]
Mr. Cubeddu and Mr. Ahuja issued the following statement in Washington,
D.C. today at the conclusion of these meetings:
“The Argentine authorities and IMF staff reached staff-level agreement on
an updated macroeconomic framework and associated policies necessary to
complete the fourth review under Argentina’s arrangement. This agreement is
subject to approval by the IMF Executive Board, which is expected to meet
in the coming weeks. Completion of the review will give Argentina access to
about US$ 5.3 billion (SDR 4.0 billion).
“In the context a more complex economic environment, the review focused on
assessing progress in program implementation, updating the macroeconomic
framework, and reaching understandings on a strong policy package to
durably address macroeconomic imbalances while limiting future
vulnerabilities.
“All quantitative performance criteria through end-December 2022 were met
with some margin. The 2022 primary fiscal deficit reached 2.3 percent of
GDP (compared to a target of 2.5 percent), notably because of continued
strong expenditure control, and actions to improve the targeting of
subsidies and social assistance. At the same time, net international
reserves (NIR) rose by US$5.4 billion (above the target of US$5.0 billion),
on account of improvements in the trade balance and sizeable official
support. Real GDP expanded by 5.4 percent in 2022 and end-period annual
inflation reached 94.8 percent.
“Against the challenges of an increasingly severe drought, a stronger
policy package is necessary to safeguard macroeconomic stability, address
rising inflation and recent policy setbacks, as well as ensure achievement
of underlying program objectives. Such policies should be firmly and
consistently implemented. Understandings were reached in the following key
areas:
-
Fiscal policy
. The authorities are committed to achieving the primary fiscal deficit
of 1.9 percent of GDP in 2023 through continued expenditure controls,
improved targeting of energy subsidies and social assistance, and
better prioritization of capital spending, while protecting priority
social and infrastructure spending. To meet deficit reduction goals and
strengthen the progressivity of energy subsidies, the authorities plan
to continue implementing the agreed segmentation scheme, by eliminating
subsidies for higher income residential users starting in May and
commercial users by end-2023. Early and resolute actions will be taken
to sustainably address the fiscal costs of the unforeseen approval of
the pension moratorium to secure fiscal targets for this year and
beyond.
-
Monetary and FX policy
. To address continued inflation pressures, which have picked up in
recent months, the authorities intend to keep policy interest rates
positive in real terms. Meanwhile, efforts will continue to secure
external competitiveness and strengthen reserve coverage, which the
authorities plan to complement through the timely rationalization of FX
policy. They are also committed not to use international reserves or
issue short-term external debt instruments to intervene in the parallel
FX markets.
-
Financing strategy
. A proactive market-based domestic debt management strategy is being
cautiously implemented and well communicated. This is helping to manage
forthcoming domestic maturities, especially in the second and third
quarters, mobilize domestic financing, and improve bond and FX market
functioning, without adding to vulnerabilities down the road. The
authorities continue mobilizing official financing from multilateral
and bilateral sources, including by finalizing bilateral understandings
with the few remaining Paris Club creditors. These efforts will help
keep direct monetary financing of the fiscal deficit to at most 0.6
percent of GDP in 2023, in line with program targets.
“While stronger macroeconomic policies and efforts to mobilize financing
are expected to enhance reserve coverage and reverse recent reserve losses,
a modification of the 2023 net international reserve accumulation target is
being requested. This will partially accommodate the impact of the
increasingly severe drought, while also taking into account the offsetting
effects from lower energy import prices and the agreed policy measures. The
bulk of the accommodation is requested to take place in early 2023,
consistent with the frontloaded impact of the drought.
“Going forward, it will be essential to maintain strong policies and adapt
them as necessary to evolving external and domestic conditions. Temporary
administrative FX measures should not be a substitute for sound
macroeconomic policy.
“We thank the Argentinean authorities for their ongoing open and
constructive discussions and welcome their continued commitment to tackle
macroeconomic imbalances, and safeguard stability.”
[1]
Argentina’s EFF arrangement, with access of SDR 31.914 billion (equivalent
to US$44 billion, or about 1000 percent of quota), was approved on March
25, 2022.