- The Executive Board's decision enables an immediate disbursement of around US$4.7 billion (or SDR3.5 billion) to support the new authorities' strong policy efforts to restore macroeconomic stability and bring the program back on track.
- An ambitious stabilization plan is being implemented to correct severe policy slippages in the final quarters of 2023. The plan is centered on the establishment of a strong fiscal anchor along with policies to durably bring down inflation, rebuild reserves, and tackle distortions and long-standing impediments to growth.
- The path to stabilization will be challenging, requiring steadfast policy implementation and agile policymaking. Clear communication and well-targeted social assistance will be critical to build social and political support for the program.
Washington, DC - January 31, 2024: The Executive Board of the International Monetary Fund (IMF) completed today the seventh review of the extended arrangement under the Extended Fund Facility (EFF) for Argentina. The Board's decision enables an immediate disbursement of around US$4.7 billion (or SDR3.5 billion) to support the authorities' upfront policy efforts and strong commitments to restore macroeconomic stability and help Argentina meet its balance of payments needs. This brings total disbursements under the arrangement to about US$ 40.6 billion[1].
In completing the review, the Executive Board assessed that key program targets through end-December 2023 were missed by large margins due to severe policy setbacks, requiring the approval of waivers of nonobservance. The Board approved waivers of non-observance associated with the introduction of temporary measures that gave rise to the introduction or intensification of exchange restrictions and multiple currency practices. In addition, program targets were modified, in line with the authorities' initial actions and ambitious plans to bring the program back on track, and restore macroeconomic stability while protecting the most vulnerable. The Board also approved an extension of the arrangement through December 31, 2024, along with some rephasing of planned disbursements within the existing envelope of the program.
At the conclusion of the Executive Board's discussion, Ms. Kristalina Georgieva, Managing Director and Chair made the following statement:
"Following completion of the last reviews, Argentina's already large imbalances and distortions grew more acute, and the program went significantly off track, reflecting the inconsistent policies of the previous government. Amidst this difficult inheritance-elevated and rising inflation, depleted reserves, and high poverty levels-the new administration is taking bold actions to restore macroeconomic stability and begin to address long-standing impediments to growth. These initial actions averted a balance of payments crisis, although the path to stabilization will be challenging.
"The agreed ambitious stabilization plan is centered on the establishment of a strong fiscal anchor that ends all central bank financing of the government. The achievement of a primary fiscal surplus of about 2 percent of GDP this year will be underpinned by a combination of temporary import-related taxes and the strengthening of fuel taxes, alongside efforts to streamline energy and transport subsidies, administrative costs, and lower-priority discretionary spending. Social assistance is also being reinforced to support the most vulnerable and safeguard the real value of pensions. Over time, higher-quality fiscal measures are envisaged to deliver structural improvements in revenue and spending and secure consolidation and more equitable burden sharing.
"Following the exchange rate realignment, FX policy should continue to secure reserve accumulation goals. Important steps are being taken to address the large commercial debt overhang and create a more transparent and rules-based system to import. In addition, the authorities are committed to eliminate remaining distortive exchange restrictions and multiple currency practices in the near term, and to develop plans for gradually unwinding capital flow management measures, as conditions permit.
"The monetary policy stance should evolve to support money demand and disinflation while the monetary policy framework and operations will be adjusted to strengthen its anchoring role. Further strengthening the central bank's balance sheet remains a priority.
"Efforts are underway to correct large and extensive relative price misalignments, reform the energy sector, and create a simpler, rules-based, and market-oriented economy. Barriers to growth, formal employment, and trade are being addressed, while a more predictable regulatory framework is envisaged to boost investment and unlock Argentina's energy and mining potential.
"Agile policymaking and contingency planning will be essential, and further measures may be needed to secure program objectives and durably restore stability. Clear communication and well-targeted social assistance remain imperative, as well as continued efforts to build social and political support for the program."
[1] Argentina's 30-month EFF arrangement, with access of SDR 31.914 billion (equivalent to around US$44 billion, or about 1000 percent of quota), was approved on March 25, 2022 (see Press Release No. 22/89).
