Argentina announces new deal with the IMF
The Government of Argentina reached an understanding with the International Monetary Fund (IMF) whereby the global agency will make disbursements worth over US$ 7 billion in August and November, it was announced Friday in Buenos Aires.
As per the staff level agreement, the Economy Ministry would be able to intervene in turbulent situations in the currency exchange and other domestic markets. The IMF also requested the Central Bank (BCRA) reserves increased, in addition to keeping the fiscal deficit at 1.9% of the GDP.
The new agreement between Argentina and the IMF comes before the July 31 maturities worth US$3.3 billion.
This is the conclusion of the work we have been doing, this allows us to go through the remaining part of the year with much more tranquility, Economy Minister Sergio Massa said.
This is good news, beyond the fact that we have to understand that it is not good that a country has to be continuously renegotiating with the International Monetary Fund because of a bad management of the previous government, he added.
Basically, what was defined is a program of objectives and goals, of accumulation of reserves, of a balance of public accounts. In this sense, we have been able to lower withholdings [export taxes] from regional sectors, so that we can also try to better manage exports of many purchases made using Argentine dollars, Massa also pointed out.
An IMF statement read that ”The Argentine authorities and the IMF staff have reached an agreement at the staff level on the fifth and sixth reviews under Argentina’s 30-month Extended Fund Facility (EFF) arrangement.
The agreement is subject to continued implementation of the agreed policy actions and approval by the IMF Executive Board, which is expected to meet in the second half of August. Upon completion of the fifth and sixth reviews, Argentina will have access to about US$ 7.5 billion, it added.
A policy package has been agreed upon with a sequential set of measures to rebuild reserves and improve fiscal sustainability while protecting critical infrastructure and social spending,” the financial organization said after weeks of negotiations.
Once the IMF Board approves and formally considers the fifth and sixth reviews as completed, Argentina will have access to about US$ 7.5 billion and the next review (the seventh of the program) is expected to take place in November, as anticipated by the Fund, when in the original program it was scheduled for early next year.
In 2022, the IMF and Argentina agreed on a credit program under which the South American country receives US$44 billion over 30 months in exchange for Argentine President Alberto Fernandez increasing its international reserves and reducing the fiscal deficit from 3% of the Gross Domestic Product (GDP) in 2021 to 2.5% in 2022, 1.9% in 2023 and 0.9% in 2024.
Since March 31, when the fourth review was completed, Argentina’s economic situation has become very challenging and key program targets through the end of June were not met due to the higher-than-expected impact of the drought, as well as policy slippages and delays, the fund warned.
The new agreement will give Argentina access to around US$ 7.5 billion but is subject to the government implementing the agreed measures and to the approval of the board, which will convene during the second half of August.