Argentina approved the eighth review of the IMF and will receive US$800 million

Argentina approved the eighth review of the IMF and will receive US$800 million

He International Monetary Fund (IMF) confirmed that Argentina approved the eighth review of the agreement, so the disbursement of US$800 million in June is now cleared. The organization highlighted that in addition “understandings were reached on economic policies to consolidate the achievements made to date.”

In a statement, the IMF said: “Based on better-than-expected results—all first-quarter performance criteria were overmet—IMF staff and Argentine authorities reached an understanding on policies to continue strengthening the disinflation process, reconstitute international reserves, support the recovery and keep the program firmly on track.

“This understanding is subject to the continued implementation of the agreed policy measures and the approval of the IMF Executive Board, which is expected to review it in the coming weeks. Once the review is completed, Argentina would have access to disbursements in line with the program “he added.

The IMF included in the statement the context in which Javier Milei took office: “Despite inheriting a highly complex economic and social situation, the firm implementation of the authorities’ stabilization plan—based on a solid fiscal anchor, the absence of monetary financing and the correction of relative prices—has allowed progress to be made faster than expected. expected in the restoration of macroeconomic stability and to firmly redirect the program. Among the most notable results are the first quarterly fiscal surplus in 16 years, the rapid fall in inflation, the change in the trend of international reserves and a sharp reduction in the sovereign risk. In parallel, and in a context of a contraction in economic activity that began at the end of 2023, the authorities have made significant efforts to expand social assistance to vulnerable mothers and children, as well as protect the purchasing power of pensions. Progress continues in expanding political and social support for these efforts and in the fight against entrenched interests.

The organization highlighted that in addition “understandings were reached on economic policies to consolidate the achievements made to date.”

“Based on the great progress made to date, the authorities have indicated that their policies will continue to evolve to safeguard the durability of the stabilization and reform process. In this context, understandings were reached on economic policies to consolidate the achievements made to date.

  • Fiscal policy. The goal of achieving global fiscal balance without net central bank financing remains unchanged. The program will continue to focus on improving the quality and equity of fiscal consolidation, including through reforms that improve the efficiency and progressivity of the tax system, reduce subsidies, and strengthen both spending controls and accountability. At the same time, social assistance will continue to be strengthened as necessary.
  • Monetary and exchange rate policy. The priority continues to be to strengthen the disinflation process and strengthen international reserves and the central bank’s balance sheet. In the transition to a new monetary regime (involving currency competition), monetary policy will evolve to continue anchoring inflation expectations and exchange rate policy will become more flexible, while exchange restrictions and controls will continue to be reduced as that conditions allow it.
  • Structural policy. It is expected that the ongoing and carefully sequenced microeconomic reforms will serve to underpin the economic recovery, as well as address obstacles to productivity, private investment and formal employment.
  • Program modalities. The objectives and conditionality of the program have been updated to reflect the best recent developments and the new economic landscape. Financing guarantees are also being obtained from official creditors.

“The IMF technical staff thanks the Argentine authorities, led by Minister Luis Caputo and the President of the Central Bank Santiago Bausili, for their continued constructive commitment, as well as their firm will to restore economic stability and lay the foundations for a stronger and more sustainable, which promotes employment and private investment for the benefit of all Argentines.”

The Secretary of Finance, Pablo Quirno, and the vice president of the Central Bank, Vladimir Werning, They held meetings with IMF technicians to adjust the details of all the information that will be added to the Staff Level Agreement.

Argentina met the goals of reducing the fiscal deficit and purchasing Central Bank reserves. For that reason, it was not necessary to request a waiver (forgiveness) intended to obtain the June disbursement.

The eighth technical review of the program confirmed that the primary surplus was four times higher than anticipated when the Extended Facilities credit was agreed.

Also that the Central Bank’s reserves accumulated more than US$2,000 million dollars than stipulated and that the monetary issue was within the established limits.

The fulfillment of the goals and the absence of a waiver to obtain the disbursement of 792 million dollars opens a new stage in the relationship that the Milei government maintains with Georgieva and her staff.

President Javier Milei intends an extra disbursement to strengthen the Central Bank’s reserves and open the stocks, but so far everything indicates that this will not happen.

At the beginning of the week, the Government paid the Fund approximately 800 million dollars and the Central Bank’s reserves fell by 687 million of the same currency. This was in addition to last week’s payment of another $1.9 billion.

Source: Ambito

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