The IMF has reached a staff level agreement with Argentina to set that country’s economy on a sustainable and credible path to deal with its international debts, the Fund announced Thursday (March 3) in Washington, DC.
The agreement addresses economic and financial policies to be supported by a 30-month Extended Fund Facility (EFF) Arrangement. The EFF, with requested access of SDR 31.914 billion (equivalent to US$ 45 billion or 1000 percent of quota), aims to provide Argentina with balance of payments and budget support to address the country’s most pressing economic challenges and to enhance the prospects of all Argentines by implementing measures designed to promote growth and protect essential social programs.
“We have reached this agreement on a pragmatic, realistic program with credible economic policies to strengthen macroeconomic stability. We expect over time this program will start addressing Argentina's deep rooted challenges to sustainable growth,” said Ilan Goldfajn, Director of the Western Hemisphere Department at the IMF
Goldfajn said the program’s emphasis on credibly improving public finances. This will be based on a balanced set of revenue policies—with an emphasis on progressivity, efficiency, and compliance—and expenditure policies—reducing untargeted energy subsidies and reorienting towards more productive social and infrastructure investment—to strengthen debt sustainability while supporting the recovery.
The program will also seek to strengthen Argentina’s balance of payments through policies that support reserve accumulation and net exports, and which will pave the way to an eventual re-entry by Argentina into international capital markets. Such policies will include the prudent monetary and fiscal policies already outlined, as well as policies aimed at maintaining a competitive real effective exchange rate in the context of the crawling peg regime.
He expressed confidence in Argentina’s government to follow through on the goals.
“We have full confidence on the authorities to deal with this and have the political support. And we will not enter into domestic politics on that because we have the full confidence of the authorities.”
The Fund was asked about the credibility of the plan, given that Argentina has historically had difficulties implementing loan repayment schedules, and some political factions in the country have been hostile to IMF involvement.
“Because it is based on realistic goals? It is based on a pragmatic approach and it is based on the ownership of the program by the authorities. It is something that can be achieved, is realistic, have learned from past experiences and now looks that Argentina knows that we will start addressing the deep-rooted imbalances and we will steer Argentina in the right direction. So realistic and credible, and that is what we can offer the Argentine people,” Goldfajn replied.
The staff-level agreement is still subject to approval by the IMF’s Executive Board, which has been briefed informally on the elements of the proposed program. The Executive Board is expected to discuss the request for the IMF-supported program after the Argentine National Congress approves the economic and financial program embodied in the Memorandum of Economic and Financial Policies and related documents that will be shared with lawmakers by the authorities. This legislative consideration is required by Argentina’s domestic law.
A full copy of the agreement can be found at https://www.imf.org/en/Countries/ARG