Press Release No. 19/107

IMF Executive Board Completes Third Review Under Argentina's Stand-By Arrangement, Approves US$10.8 Billion Disbursement

April 5, 2019

The Executive Board of the International Monetary Fund (IMF) completed today the third review of Argentina’s economic performance under the 36-month Stand-By Arrangement (SBA) that was approved on June 20, 2018. The completion of the review allows the authorities to draw the equivalent of SDR 7.8 billion (about US$10.8 billion), bringing total purchases since June 2018 to SDR 28.01371 billion (about US$38.9 billion).

Following the Executive Board discussion of Argentina’s economic plan, Ms. Christine Lagarde, the IMF’s Managing Director stated:

“The authorities’ policies that underly the Fund-supported arrangement are bearing fruit. The high fiscal and current account deficits - two major vulnerabilities that led to the financial crisis last year - are falling. Economic activity contracted in 2018 but there are signs that the recession has bottomed out, and a gradual recovery is expected to take hold in the coming quarters. Inflation however remains high with inflation expectations rising and inflation inertia proving difficult to break.

“The Argentine government demonstrated its resolve to put the public debt-to-GDP ratio on a sustainable path by reducing the 2018 primary deficit below the program target. However, in light of weaker-than expected tax revenues in the first half of the year, continued prudence in the execution of spending plans and further steps to strengthen revenues, will be key to bring the 2019 fiscal position to a primary balance. Further effort is needed to improve the medium-term fiscal framework and debt management.

“After a few months of relative stability, financial volatility has picked up in recent weeks, as global financial conditions have become less favorable and as inflation outcomes have disappointed. The BCRA reacted to these developments by recalibrating its monetary policy, maintaining zero growth in the monetary base until the end of the year. A new central bank charter has been sent to Congress and, if passed into law, will strengthen the credibility of monetary policy.

“Protecting the most vulnerable from the impact of the recession and from high inflation remains a key priority. The authorities have taken a series of actions to improve the coverage of the social safety net and to provide greater resources to the poor. Continued work will be needed to address the remaining gaps in coverage of the social safety net and to make social programs more effective in reducing poverty.

“Favorable market conditions have allowed the government to fully rollover maturing debt over the past few months. The interest rate paid on that debt has fallen and the authorities are deepening their efforts to extend maturities on newly-issued debt. The authorities are also implementing policies to develop domestic currency debt markets.

“Supply-side reforms are essential in achieving strong, sustainable, and equitable growth and to raise living standards for Argentina’s population. Priorities include further efforts to designing a less distortionary tax system, encouraging greater competition in domestic product markets, removing barriers to trade and foreign investment, strengthening governance and confronting corruption, and fostering gender equity.

“The success of the authorities’ policy plans relies on its continued steadfast implementation. This will require the building of broad-based support for policies that will lessen economic vulnerabilities, raise Argentina’s growth potential, and foster market confidence.”