Press Release No. 22/189

IMF staff and Argentine Authorities Reach Staff-Level Agreement on the First Review Under the Extended Fund Facility Arrangement

June 8, 2022

• IMF staff and the Argentine authorities have reached staff-level agreement on the first review under Argentina’s 30-month EFF arrangement. Upon completion of the review, Argentina would have access to about US$ 4.03 billion (equivalent to SDR 3 billion).
• All quantitative program targets in the first quarter of 2022 were met. Initial progress is also being made on the growth-enhancing reforms in line with program commitments.
• IMF staff and the Argentine authorities have agreed that the annual objectives established at approval of the arrangement will remain unchanged. This is critical to enhance stability and support the ongoing economic recovery. The authorities’ commitment to implementing additional policy measures to achieve these annual objectives is welcome.

Washington, DC – June 8, 2022: An International Monetary Fund (IMF) team, led by Julie Kozack, Deputy Director of the Western Hemisphere Department, and Luis Cubeddu, Mission Chief for Argentina, conducted in-person and virtual meetings with the Argentine authorities to discuss policies to complete the first review of the extended arrangement under the Extended Fund Facility (EFF). [1] Ms. Kozack issued the following statement in Washington, D.C. today at the conclusion of those meetings:

“IMF staff and the Argentine authorities have reached staff-level agreement on an updated macroeconomic framework, and associated policies necessary to complete the first review under Argentina’s 30-month EFF arrangement. The agreement is subject to 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 to about US$ 4.03 billion (equivalent to SDR 3 billion).

“The review focused on assessing program performance since approval of the arrangement, analyzing the effects of the large external shock from the war in Ukraine on Argentina’s economy, and identifying policies to address the effects of the shock. Crucially, IMF staff and the Argentine authorities have agreed that the annual objectives established at approval of the arrangement will remain unchanged, specifically those related to the primary fiscal deficit, monetary financing, and net international reserves. Such an approach provides a vital anchor for economic stability and growth in uncertain times.

“All quantitative targets in the first quarter of 2022 were met. Initial progress is also being made on the structural agenda and growth-enhancing reforms in line with program commitments, including on the energy front.

“The external shock associated with the war in Ukraine is projected to have a limited impact on Argentina’s growth and the balance of payments this year, but—as in most other countries—higher global commodity prices have already led to higher inflation. Notwithstanding recent increases in energy tariffs, Argentina’s fiscal position is also being affected by the commodity price shock through a higher energy subsidy bill and an appropriate expansion of targeted social support to low-income households.

“While addressing the impact of the shock, the Argentine authorities are committed to implementing policies to achieve the program’s annual objectives for the primary fiscal deficit, monetary financing, and reserve accumulation. On fiscal policy, the authorities plan to reprioritize public spending to achieve the 2022 fiscal target of 2.5 percent of GDP while lowering monetary financing to 1 percent of GDP as planned at approval of the arrangement. They have also reaffirmed their commitment to continue to apply the enhanced monetary and FX policy framework to deliver positive real policy interest rates, secure exchange rate competitiveness, and support reserve accumulation of US$5.8 billion for the year as a whole. To take into account the upfront impact of the external shocks and seasonal expenditure and import patterns, a modification of the intra-year quarterly paths for the primary fiscal deficit and reserve accumulation is being proposed, while keeping the annual program objectives unchanged.

“Looking forward, determined policy implementation will be critical to ensure that program objectives will be met during the remainder of 2022 and beyond. That also includes taking steps to mobilize net domestic peso financing, improve monetary policy transmission, enhance compliance with the tax system, strengthen the AML/CFT framework, and encourage investment in strategic sectors.

“IMF staff thanks the Argentinean authorities for open engagement and constructive discussions, and welcomes their strong commitments to implement the program, which aims to support Argentina to strengthen economic stability, tackle persistent high inflation, and continue to address its deep-rooted challenges.”