Argentina and the IMF reach staff level agreement

The decision grants the country access to a US$7.5 bn disbursement

The Argentine government and the IMF staff have reached a staff level agreement that grants the country access to a US$7.5 bn disbursement. The news was confirmed by the IMF through a press release signed by Luis Cubeddu, Deputy Director of the Western Hemisphere Department and Ashvin Ahuja, Mission Chief for Argentina. 

“This agreement is subject to the continued implementation of agreed policy actions and approval by the IMF Executive Board, which is expected to meet in the second half of August. Completion of the fifth and sixth reviews will give Argentina access of about US$7.5 billion,” said IMF officials. 

In the agreement, Argentina’s fiscal deficit target for 2023 remains unchanged at 1.9% of GDP, despite the Fund recognizing in the document that the drought “had a significant impact” on the country’s fiscal revenues.

“Adherence to the target requires further tightening the fiscal stance in the second half of this year, supported by a series of agreed revenue and spending measures, while protecting priority infrastructure and social programs,” the Fund’s announcement read.

The Fund, however, expects the country to tighten “spending controls through better targeted social assistance.” In March, the government started trimming the Potenciar Trabajo welfare program by “excluding ineligible recipients” after the IMF demanded so. 

In Friday’s press release, the lender also demanded “further rationalization of current transfers to provinces and state-owned enterprises” and called for Argentina to limit spending on wages and hike energy tariffs “to better reflect changes in production costs.”

Argentina’s 2023 reserve accumulation target has been reduced from US$8 billion to US$1 billion, in recognition of the disastrous effects of this year’s drought on agricultural export income.

The Fund noted that Argentina did not meet its targets for the end of June, but said that waivers would be requested for this, in recognition of the impacts of the drought.

The government and the IMF signed an Extended Fund Facility agreement in 2022 after renegotiating the US$44 billion debt former President Mauricio Macri acquired in 2018. The deal includes an economic program that Argentina must comply with in order to receive disbursements every three months, which are used to pay for the previous debt with the IMF.

The announced US$7.5 billion disbursement comes from the combination of the fifth and sixth reviews of the program. The next review is expected to take place in November, after the presidential elections.

This month, the Argentine government has maturities with the Fund for US$2.6 billion. At the beginning of the month, the administration announced it would pay these on July 31. Net international reserves are currently at negative US$7 billion and the IMF disbursements are coming in the second half of August at the earliest. Last month, Argentina used yuan to face part of the June US$2.7 billion maturity with the IMF, in order to not spend the scarce US dollars in the Central Bank.

Economy Minister Sergio Massa, who is also a presidential candidate for ruling coalition Unión por la Patria, said the agreement would “allow us to transit the second half of the year, which, obviously marked by the electoral period, can sometimes generate uncertainty or doubt, with a lot more calm.”

Addressing journalists Friday midday, he said: “The country is constantly having to negotiate with the IMF, renegotiating its debt as a product of what was, in my view, a terrible decision by the previous government to take US$45 billion dollars in debt to finance the exit of what was, at the time, the carry trade of what were U.S. investment funds. It’s not pleasant, but what we have to do is administer it.”

“It isn’t that we have to hand over anything at all, what’s being defined is a program for how to proceed with the public accounts, with reserve accumulation.”


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