A report by the International Monetary Fund (IMF) published on Wednesday called for Argentina to enforce fiscal consolidation, tighten its monetary policy and streamline its foreign exchange market to fix its battered economy.

The outlined measures, listed in the lender’s External Sector Report, are aimed at moderating the country’s domestic demand, strengthening the trade balance, rebuilding international reserves, regaining market access, and ensuring fiscal and external debt sustainability.

According to the report, Argentina’s external position is weaker than anticipated due to “elevated external debt vulnerabilities, precariously low international reserves, and lack of access to international capital markets.”

The publication of this report coincides with an official trip by the Argentine Economy Ministry to the IMF headquarters in Washington. They are discussing the country’s economic program with the lender, established in 2022 following the renegotiation of the record-high US$44 billion debt former President Mauricio Macri acquired in 2018.

One of the main reforms that the report suggested is the gradual elimination — as “stability and confidence are reestablished” — of Argentina’s multiple exchange rates and exchange restrictions imposed by the government. The document states that these measures were intensified during 2022 due to pressures on the exchange rate and the loss of international reserves. Today there are at least a dozen exchange rates on the market.

The lender also contends that these measures are generally useful to “contain capital outflows” but introduce distortions that discourage trade and foreign investment. 

The IMF staff also concluded that the Argentine peso is overappreciated against a weighted average of the currencies of its major trading partners.

They found that the real effective exchange rate appreciated by 20% during 2022 — by April 2023, it had appreciated 1.4% above the 2022 average. Overall, the IMF staff concluded that the real effective exchange rate gap of 2022 to be in the range of 15-20%.

The report also suggests that the government’s foreign currency sales in the official and the parallel markets “should be consistent with reserve accumulation goals.” The possibility of the government intervening in the secondary bond market to stop runs on the Argentine peso is one of the main topics Argentina is discussing with the IMF.