Press Release No. 22/459

IMF Executive Board Completes Third Review of the Extended Arrangement Under the Extended Fund Facility for Argentina

December 22, 2022

• The Executive Board of the International Monetary Fund completed today the third review of Argentina’s 30-month EFF arrangement, allowing for an immediate disbursement of about US$6 billion.
• Tighter macroeconomic policies since July are starting to bear fruit—inflation is moderating, the trade balance is improving, and reserve coverage is gradually strengthening.
• With a more challenging external and domestic backdrop, decisive program implementation will be critical to safeguard stability and program objectives

Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed today the third review of the extended arrangement under the Extended Fund Facility (EFF) for Argentina. The Board’s decision enables an immediate disbursement of SDR 4.5 billion (about US$6 billion), bringing total disbursements under the arrangement to about US$23.5 billion.

In completing the review, the Executive Board assessed that all quantitative performance criteria through end-September 2022 were met, on the back of prudent macroeconomic management by the new economic team. In addition, the Board also approved waivers of non-observance associated with the introduction of policy measures that gave rise to new exchange restrictions and multiple currency practices and called for their unwinding as conditions permit.

Argentina’s 30-month 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 (see Press Release No. 22/89). The authorities’ IMF-supported program provides Argentina with balance of payments and budget support that is linked to the implementation of polices to strengthen public finances, tackle persistent high inflation, improve reserve coverage, and set the basis for sustained and inclusive economic growth.

At the conclusion of the Executive Board’s discussion, Ms. Gita Gopinath, First Deputy Managing Director and Acting Chair, made the following statement:

“Continued decisive policy actions are starting to bear fruit. Against a more challenging external and domestic backdrop, resolute policy implementation, including tightening of fiscal and monetary policies, is leading to a reduction in inflation as well as improvements in the trade balance and reserve coverage. Nevertheless, macroeconomic imbalances persist, and conditions remain fragile. Continued enhanced program implementation will therefore be critical to achieve key program objectives and maintain the program as an anchor for stability. Exchange restrictions and multiple currency practices should be avoided and unwound as early as conditions permit, and macroeconomic imbalances are addressed.

“Fiscal consolidation as budgeted will be needed to support the disinflation and reserve accumulation processes, alleviate financing pressures, and strengthen debt sustainability. Reducing the primary fiscal deficit to 1.9 percent of GDP in 2023 while providing space for priority infrastructure spending will require continued efforts to mobilize revenues, strengthen expenditure controls, and, importantly, improve the targeting of energy subsidies and social assistance. The timely implementation of measures will be critical to boost credibility.

“Sustained positive real interest rates remain essential to reduce persistent high inflation and strengthen the demand for peso assets. In addition, it would allow for improvements in competitiveness and reserve coverage, while avoiding reliance on ad-hoc FX incentives and restrictions as they are not a substitute to consistent macroeconomic policies. Meanwhile, voluntary price and wage coordination could play a complementary role as macroeconomic imbalances are addressed.

“A proactive market-oriented debt management strategy is vital to mobilize domestic financing, mitigate rollover risks, and reduce central bank financing of the deficit. Building on recent progress, including the welcome restructuring agreement with Paris Club creditors, mobilizing support from multilateral and bilateral partners remains essential to ensure financing commitments are met and reserve coverage is strengthened.

“Continued efforts on the structural front remain key to support broader macroeconomic goals, including by strengthening public financial management, the peso government debt market, AML/CFT framework, the central bank balance sheet, and the efficiency and sustainability of the energy sector.

“Agile policy making remains essential to meet program objectives, and further policy actions could be necessary to safeguard macroeconomic stability if downside risks materialize. Broad political support for program policies remains critical in the period ahead.”