Equipo Nizkor - IMF Staff and the Argentine Authorities Reach Staff-Level Agreement on Eighth Review under the Extended Fund Facility Arrangement.

IMF staff and the Argentine authorities have reached staff-level agreement on the eighth review under Argentina's EFF arrangement. Subject to approval by the IMF Executive Board, Argentina would have access to disbursement in line with the program.

Building on the better-than-expected performance thus far--all performance criteria were met with margins--understandings were reached on policies to keep driving down inflation, rebuild external buffers, support the recovery, and keep the program firmly on track.

Continued efforts are underway to improve the quality and fairness of fiscal consolidation, refine monetary and FX frameworks, and unlock bottlenecks to growth.

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, issued the following statement in Washington DC, today following conclusions of discussions on the eighth review of the Extended Fund Facility (EFF) arrangement for Argentina |1|:

"Building on the better-than-expected performance in the first quarter--all performance criteria were met with margins--IMF staff and the Argentine authorities reached understandings on policies to continue to entrench the disinflation process, rebuild external buffers, support the recovery, and keep the program on track. This agreement is subject to continued implementation of agreed policy actions and approval by the IMF Executive Board, which is expected to discuss it in the coming weeks. Upon completion of the review, Argentina would have access in line with the program.

Background

"Despite inheriting a very challenging economic and social situation, the authorities' decisive implementation of their stabilization plan--based on a strong fiscal anchor, no monetary financing, and initial relative price corrections--has resulted in faster-than-anticipated progress in restoring macroeconomic stability and bringing the program firmly back on track. Notable results include the first quarterly fiscal surplus in 16 years, rapidly falling inflation, a turnaround in international reserves, and sovereign spreads near multi-year lows. In parallel, and against the backdrop of a contraction in economic activity, which began in late-2023, the authorities have made significant efforts to scale up social support for vulnerable young mothers and children and protect the purchasing power of pensions. Progress continues in broadening the political and societal support for these efforts and in tackling vested interests.

Key understandings

"Building on this strong progress, the authorities have indicated that their policies will continue to evolve to safeguard the durability of the stabilization and reform plan, recognizing the long and difficult road ahead. In this context, understandings were reached on policies to build on the gains made so far.

Fiscal policy. The objective of achieving overall fiscal balance with no net central bank financing remains unchanged. The program will continue to focus on improving the quality and fairness of consolidation efforts, including through reforms that improve the efficiency and progressivity of the tax system, streamline subsidies, and strengthen expenditure controls and accountability. Importantly, social assistance will continue to be strengthened as needed.

Monetary and FX policy. The priority remains to entrench the disinflation process while further strengthening reserves and the central bank's balance sheet. In the transition towards a new monetary regime (involving currency competition), monetary policy will evolve to continue anchoring inflation expectations and FX policy will become more flexible, while FX restrictions and controls continue to be eased as conditions allow.

Structural policy. Ongoing and carefully sequenced micro-level reforms and deregulation are expected to underpin the projected economic recovery, as well as unlock bottlenecks to productivity, private investment, and formal employment.

Program modalities. Program targets and conditionality have been updated to reflect positive recent developments, a new economic forecast, and progress on structural reforms. Financing assurances are also being secured from official creditors.

"IMF staff thanks the Argentine authorities, led by Minister Caputo and Central Bank President Bausili for their ongoing constructive engagement, as well as their strong ownership and commitment to restoring economic stability and setting the basis for a more sustainable and vigorous private sector-led economy that benefits all Argentines."

[Source: IMF Communications Department, Washington, DC, 13May24]

Notes:

1. IMF Executive Board Approves 30-month US$44 billion Extended Arrangement for Argentina and Concludes 2022 Article IV Consultation [Back]

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