Press Release No. 19/78

IMF Staff Concludes Third Review Mission to Argentina

March 18, 2019

An International Monetary Fund (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.

Mr. Cardarelli issued the following statement today:

“IMF staff and the Argentine authorities have reached an agreement on the third review of the economic program supported by the Stand-By Arrangement. Subject to the approval of the Executive Board, Argentina would have access to about US$10.87 billion (equivalent to SDR 7.8 billion) ^[1]. The Executive Board’s review is expected in the coming weeks.

“We commend the authorities’ policy efforts and strong determination to address macro-economic imbalances and advance their economic stabilization plan. The high fiscal and external deficits, 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 good prospects for a gradual recovery.

“Monthly inflation remains high and breaking inflation inertia will be a lengthy process that will require persistence and consistency in the Central Bank’s cautious approach to monetary base targeting. Staff, therefore, welcomes the authorities’ decision to extend the zero-base money growth until November and to lessen the pace at which the edges of the non-intervention zone will increase. This tightening of the monetary framework will contribute to bringing down inflation and re-anchoring inflation expectations.

“The authorities have met their 2018 primary deficit target, demonstrating their resolve to eliminate the vulnerability associated with Argentina’s fiscal imbalance. Achieving a zero primary deficit in 2019 will require further restraint in government spending. Such efforts will 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.

“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.

“Weak economic activity and high inflation are taking a toll. We strongly support the authorities’ efforts to mitigate the social impact of the needed stabilization policies, including through recently announced increases in social spending (which will be accommodated with the program through an increase in the adjustor for social assistance spending from 0.2 to 0.3 percent of GDP).

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

“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 wishes to thank the authorities and all other interlocutors for their warm welcome, constructive dialogue, and cooperative spirit.”