Argentina on Friday released the text of a memorandum of understanding and accompanying documents that are part of the agreement it has reached with International Monetary Fund staff to restructure its US$44.5-billion debt with the multilateral lender.
According to the files, Argentina seeks to increase the Central Bank's reserves by at least US$5.8 billion this year. In addition, the country will aim to eliminate Central Bank monetary financing from the budget by 2024.
The government will also seek to gradually reduce the use of inflation-linked assets.
On the other hand, the memo says that Russia's invasion of Ukraine presents great uncertainty for the programme's underlying assumptions, adding that policies may need to be "recalibrated" as necessary.
The government also aims to boost infrastructure spending by about two percent of gross domestic product, while energy subsidies are expected to be reduced by 0.6 per cent of GDP by 2022.
In this regard, it is mentioned that the government expects to save 0.06 percent of GDP with its new energy tariff segmentation programme.
At the same time, the government will seek local financing from the private sector of around two percent of GDP until 2024, while it was noted that Argentina will intervene in the exchange markets with the aim of increasing reserves. The real effective exchange rate will remain at similar levels this year as in 2021.
It was also detailed that the Central Bank will simplify its reserve requirement system, and that the country's programme has a strategy to gradually relax exchange controls over time. In addition, the government continues to negotiate loan payments with the Paris Club.
As for IMF disbursements from the programme, Argentina would receive seven billion in special drawing rights (US$9.8 billion) upon approval.
The country will also receive SDR 3 billion after the first and second reviews, SDR 4.5 billion after the third review, SDR 4 billion after the fourth review, SDR 3 billion after the fifth review, SDR 2.5 billion after the sixth and seventh reviews, SDR 800 million after the eighth and ninth reviews, and SDR 814 million after the tenth review.
Argentina has US$500 million in arrears to private companies, it added.
by Patrick Gillespie, Bloomberg