Press Release No. 24/217

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

June 13, 2024

• The Executive Board’s decision enables a disbursement of around US$800 million to support the authorities’ efforts to entrench the disinflation process, rebuild fiscal and external buffers, and underpin the recovery.
• Program remains firmly on track, with all quantitative performance criteria for end-March 2024 met with margins.
• Sustaining progress requires improving the quality of fiscal adjustment, taking initial steps towards an enhanced monetary and FX policy framework, and implementing reforms to unlock growth, formal employment, and investment.

Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed today the eighth review of the extended arrangement under the Extended Fund Facility (EFF) for Argentina. The Board's decision allows for an immediate drawing of approximately US$800 million (or SDR600 million), bringing the total disbursements under the arrangement to about US$41.4 billion[1].This will support the authorities’ efforts to restore stability and strengthen Argentina’s external viability.

In completing the review, the Executive Board assessed the program to be firmly on track, with all quantitative performance criteria through end-March 2024 met with margins. In addition, the Board also approved waivers of non-observance for a new exchange restriction and multiple currency practices in the context of some easing of dividend payment restrictions. The Board emphasized that sustaining the strong progress requires improving the quality of fiscal adjustment, initiating steps towards an enhanced monetary and FX policy framework, and implementing the structural agenda. Continued efforts to support the vulnerable, broaden political support and ensure agile policymaking will also be necessary.

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

“Since the last review, continued resolute actions to restore macroeconomic stability have put the program firmly on track. The stabilization plan—centered on a strong fiscal anchor with no new monetary financing—has delivered fiscal and external surpluses, a marked turnaround in reserves, a strengthening of the central bank’s balance sheet, and faster-than-expected disinflation, while upscaling social expenditures. All quantitative performance criteria through end-March were met with margins, with good progress on the structural agenda.

“Nevertheless, some macroeconomic imbalances and barriers to growth remain, and a difficult adjustment path still lies ahead. Policies now need to be enhanced to build on the progress made so far. Efforts should continue to broaden political and societal support for reforms, as well as to protect the most vulnerable.

“Impressive progress has been made to achieve overall fiscal balance and priority should now be placed in further improving the quality of the adjustment. Efforts should continue to reform the personal income tax, rationalize subsidies and tax expenditures, and strengthen expenditure controls. Beyond this year, deeper reforms of the tax, pension, and revenue-sharing systems, including to unwind distortive taxes, will be critical.

“Monetary and FX policies need to evolve to continue to entrench the disinflation process and further improve reserve coverage. To support the transition towards a new monetary regime, where price and financial stability remain prime objectives of the central bank and individuals are free to use currencies of their choice, the real policy rate should turn positive to support peso demand and disinflation. The exchange rate policy should also become more flexible to reflect fundamentals, and safeguard disinflation as well as reserve accumulation, particularly as capital flow management measures (CFMs) are gradually eased as conditions permit. Further steps are also needed to define the new monetary regime’s key underpinnings as well as to develop and begin to implement the framework for a conditions-based easing of FX controls and CFMs.

“Greater focus on micro-level reforms will help support the recovery and boost potential growth. The proposed reforms aimed at improving competitiveness, increasing labor market flexibility, and improving the predictability of the regulatory framework for investment, are steps in the right direction, and their approval and careful implementation should be a priority. This should be complemented by reforms to enhance transparency and governance, including the AML/CFT framework.

“Risks, although moderated, are still elevated, requiring agile policy making. Contingency planning will remain critical, and policies will need to continue to adapt to evolving outcomes to safeguard stability and ensure all program objectives continue to be met.”

[1] IMF Executive Board Approves 30-month US$44 billion Extended Arrangement for Argentina and Concludes 2022 Article IV Consultation