The International Monetary Fund (IMF) and the Argentine economic team reached an agreement at the technical staff level on the third review of the program under the Expanded Service Agreement of the Fund (SAF), which paves the way for a forthcoming disbursement of US$ 6,000 million, reported this Friday the agency in an official statement.
“The agreement is subject to the approval of the Executive Board of the IMF, which is expected to meet this month. Upon completion of the review, Argentina will have access to around US$6 billion (SDR 4.5 billion),” the statement said.
The The IMF team was led by Luis Cubeddu, Deputy Director of the Western Hemisphere Department; and Ashvin Ahuja, Head of Mission for Argentina; who held face-to-face and virtual meetings with Argentine officials to discuss policies on the third revision of the expanded agreement within the framework of the Expanded Service of the Fund (SAF).
On the Argentine side, there were Deputy Minister of Economy, Gabriel Rubinstein; the chief of advisers of the Ministry of Economy, Leonardo Madcur; the Finance Secretary, Eduardo Setti; the Undersecretary of the Budget, Raúl Rigo; and the head of the National Institute of Statistics and Censuses (Indec), Marco Lavagna.
“IMF staff and the Argentine authorities reached staff-level agreement on an updated macroeconomic framework and associated policies necessary to complete the third review under Argentina’s 30-month SAF agreement,” Cubeddu and Ahuja noted.
They explained that “the review focused on assessing recent progress in the implementation of the program and reaching understandings on policies to further strengthen macroeconomic stability in the context of a more challenging context.”
IMF staff and the Argentine authorities have reached staff-level agreement on the third review under Argentina’s program. Upon completion of the review by the Executive Board later this month Argentina will have access to about US$6 billion.
Press release: https://t.co/P11MmGVLA1 pic.twitter.com/p6BFZwVmMm— IMF (@IMFNews) December 3, 2022
They also specified that “it was agreed that the key objectives of the program, in particular those related to the primary fiscal deficit and net international reserves, would remain unchanged for the rest of 2022 and 2023 to continue anchoring policy formulation and credibility.”
They also pointed out that “the need for policies to be adapted as necessary in the event that external and internal risks materialize” was discussed.
“Despite the challenges, also a consequence of the war in Ukraine, all quantitative performance targets were met by the end of September 2022, including the primary fiscal deficit due to strong spending controls and actions to improve the targeting of subsidies. and social assistance”, affirmed the technicians of the Fund.
They also remarked that “a debt restructuring agreement was recently reached with the creditors of the paris club and efforts have been intensified to mobilize external official financing”.
“Actions by the new economic team are beginning to bear fruit, inflation is moderating (albeit from high levels) and the trade balance is improving, largely due to an appropriate slowdown in domestic demand and imports,” they noted. the executives.
They also stressed that “the authorities continue to meet the objectives of the program by the end of 2022.”
“Advances have been made, however, macroeconomic conditions are still fragile and strong implementation of the program is essential going forward,” Cubeddu and Ahuja remarked.
“It was agreed that the key objectives of the program would remain unchanged for the remainder of 2022 and 2023 to continue to anchor policymaking and credibility”
They noted that “in particular, it will be essential to continue with the fiscal consolidation process that provides for a reduction in the primary fiscal deficit from 2.5% of Gross Domestic Product in 2022 to 1.9% of GDP in 2023.”
They also indicated that “this must be backed by efforts to continue mobilizing revenue, strengthen spending controls, and improve the targeting of subsidies and social assistance in a timely manner, while providing space for priority social and infrastructure spending.”
They also considered that “the monetary and exchange rate policy framework should continue to generate positive real interest rates and an improvement in external competitiveness”.
“These actions should continue to encourage demand for assets in pesos, ensure a reduction in monetary financing in line with the goals of the program, and support a gradual reduction in annual inflation, from around 95% by the end of 2022 to 60% by the end of 2022. end of 2023”, stated the Fund technicians.
They also assured that “it is still essential to maintain a proactive internal debt strategy to mobilize internal financing and improve the functioning of the market.”
In the same way, they pointed out that “consistent macroeconomic policies also support an improvement in the current account balance which, combined with ongoing efforts to mobilize external financing, are strengthening reserve coverage.”
In this regard, they remarked that “net international reserves are scheduled to increase by US$9.8 billion by the end of 2023.”
And they stressed that “although temporary administrative exchange rate measures have been adopted as imbalances are addressed, they should be minimized in the future, since they are not substitutes for prudent macroeconomic policies.”
“On the structural aspect, continuous efforts are needed to strengthen public financial management, the public debt market in pesos, AML/CFT frameworks (Anti-Money Laundering and Counter-Terrorist Financing) and the net export potential of the sectors strategic, particularly in energy”, the executives maintained.
They also highlighted that “The forthcoming international information sharing agreement with the United States could support revenue mobilization and reserve accumulation.”
“We thank the Argentine authorities for the open and constructive discussions and we acknowledge their continued commitment to strengthen stability and promote inclusive and sustainable growth,” Cubeddu and Ahuja concluded.
