Press Release No. 22/414

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

December 2, 2022

• IMF staff and the Argentine authorities have reached staff-level agreement on the third review under Argentina’s 30-month EFF arrangement. The agreement is subject to approval by the IMF Executive Board, which is expected to meet this month. Upon completion of the review, Argentina will have access to about US$6 billion (SDR 4.5 billion).
• Prudent macroeconomic management and efforts to mobilize external financing are supporting macroeconomic stability—fiscal order is being restored, inflation is moderating, the trade balance is improving, and reserve coverage is being strengthened.
• Continued decisive policy implementation remains essential to further reduce macroeconomic imbalances, especially in the context of a more challenging external and domestic backdrop. The program objectives remain unchanged during the remainder of 2022 and 2023.

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 third 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 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 third review under Argentina’s 30-month EFF arrangement. The agreement is subject to approval by the IMF Executive Board, which is expected to meet this month. Upon completion of the review, Argentina will have access to about US$ 6 billion (SDR 4.5 billion).

“The review focused on assessing recent progress in program implementation and on reaching understandings on policies to further strengthen macroeconomic stability in the context of a more challenging backdrop. It was agreed that key program objectives—including those related to the primary fiscal deficit and net international reserves—would remain unchanged during the remainder of 2022 and through 2023 to continue to anchor policy making and credibility. In addition, there were discussions on the need for policies to adapt as needed in the event that external and domestic risks materialize.

“Despite challenges, including from the war in Ukraine, all quantitative performance criteria through end-September 2022 were met, including the primary fiscal deficit on account of strong expenditure controls and actions to improve the targeting of subsidies and social assistance. A debt restructuring agreement was recently reached with Paris Club creditors, and efforts to mobilize net official financing have intensified. Actions by the new economic team are starting to bear fruit—inflation is moderating (albeit from high levels), and the trade balance is improving, largely on account of a healthy slowdown in domestic demand and imports. Moreover, the authorities remain on track to meet the end-2022 program targets.

“While progress has been made, macroeconomic conditions remain fragile and steadfast program implementation will be essential going forward. In particular, it will be critical to continue the fiscal consolidation process which envisages a reduction of the primary fiscal deficit from 2.5 percent of GDP in 2022 to 1.9 percent of GDP in 2023. This should be underpinned by efforts to continue to mobilize revenue, strengthen expenditure controls, and improve in a timely fashion the targeting of subsidies and social assistance, while providing space for priority social and infrastructure spending.

The monetary and FX policy framework should continue to deliver positive real policy interest rates and an improvement in external competitiveness. These actions should continue to encourage the demand for peso assets, ensure a reduction in monetary financing in line with program targets, and support a gradual reduction in annual inflation--from around 95 percent by end-2022 to 60 percent by end-2023. Moreover, maintaining a proactive domestic debt strategy remains essential to mobilize domestic financing and improve market functioning.

Tighter macroeconomic policies should also support a further improvement in the current account balance, which combined with ongoing efforts to mobilize external financing, should strengthen reserve coverage—net international reserves are programmed to increase by US$9.8 billion by end-2023. While temporary administrative FX measure have been adopted as imbalances are being addressed, they should be minimized going forward, as they are not a substitute for sound macroeconomic policy.

“On the structural side, continued efforts are needed to strengthen public financial management, the peso government debt market, AML/CFT frameworks, and the net export potential of strategic sectors, particularly in energy. The forthcoming international information exchange agreement with the United States could support revenue mobilization and reserve accumulation.

“We thank the Argentinean authorities for the open and constructive discussions and welcome their continued commitment to strengthen stability and promote inclusive and sustainable growth.”

[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.