The International Monetary Fund (IMF) has paved the way for the disbursement of US$6 billion in fresh funds for Argentina after confirming that staff have reached an agreement with President Alberto Fernández’s government on the third review of its multi-billion-dollar aid package.
Last March, the multilateral lender approved a new debt assistance programme for Argentina’s troubled economy totalling just US$44 billion and spanning 30 months.
"Prudent macroeconomic management and efforts to mobilise external financing are supporting stability," the IMF said in a statement confirming that Argentina had cleared the latest review.
The agreement between the staff and the Argentine authorities "is subject to approval by the IMF's executive board” at a meeting later this month and "once the review is completed, Argentina will have access to about US$6 billion," said the Fund.
The IMF praised Argentina, saying that the government "is restoring fiscal order, moderating inflation, improving the trade balance, and strengthening reserve coverage."
But the lender warned that while progress has been made “macroeconomic conditions are still fragile and strong programme implementation is essential going forward," according to the statement signed by Luis Cubeddu, deputy director of the IMF’s Western Hemisphere department, and Ashvin Ahuja, mission chief for Argentina.
The country is struggling with runaway inflation, which has totalled 76.6 percent since Jantuary. Price hikes are “Argentina’s main drama,” Economy Minister Sergio Massa said recently.
The IMF said it is committed to maintaining measures "to support a gradual reduction in annual inflation from around 95 percent by end-2022 to 60 percent by end-2023."
Both parties agreed that key programme targets, particularly those related to the fiscal deficit and net international reserves, would remain unchanged for the remainder of 2022 and 2023 to anchor "credibility."
President Fernández’s government has made commitments to the multilateral lender, promsing to increase the Central Bank’s international reserves and reduce Argentina’s fiscal deficit from three percent of gross domestic product in 2021 to 2.5 percent this year, followed by 1.9 percent in 2023 and 0.9 percent in 2024.
Cubeddu and Ahuja said that "despite challenges, including the war in Ukraine, all quantitative performance targets were met by the end of September," pointing to controls on expenditure and steps taken to improve the targeting of subsidies via segmentation schemes.
IMF technicians highlighted that "net international reserves are set to increase by US$9.8 billion by the end of 2023," yet repeated its concerns that temporary exchange rate measures "should be minimised in the future as they are not substitutes for prudent macroeconomic policies."
Argentina’s recent debt restructuring agreement with the Paris Club group of wealthy creditors to reschedule a US$2-billion repayment and efforts to mobilise official external financing routes were among the other actions praised by the Fund’s staff.
Finally, the IMF called on Argentina to continue its efforts to strengthen financial management, improve the peso-denominated public debt market, and take advantage of the export potential of strategic sectors, such as energy.
Negotiations with the Argentine officials took place in an "open and constructive" atmosphere, both face-to-face and virtually, said Cubeddu and Ahuja, who said they were grateful for the government's commitment "to strengthen stability and promote inclusive and sustainable growth.”