IMF staff recommend relaxing Argentina’s reserves target

The financial institution approved the fourth review of the country's program.

International Monetary Fund (IMF) staff announced that it approved Argentina’s fourth review of its current program, recommending a US$ 5.3 billion payment and requesting a relaxation of reserve accumulation targets from the IMF board.

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 or payments every three months, which are used to pay for the previous debt with the IMF. What was announced today were the results of the fourth review of Argentina’s targets.

The US$ 5.3 billion payment would provide relief to the government given that, between March and April, the country must pay around US$ 5 billion to the IMF itself. 

The central point of the communiqué from IMF staff is a formal request for the IMF board to relax the reserve accumulation targets which the country committed to when it signed the Extended Fund Facility in March 2022. The IMF board ultimately decides whether or not to approve the IMF staff’s recommendations.

“While stronger macroeconomic policies and efforts to mobilize financing are expected to enhance reserve coverage and reverse recent reserve losses, a modification of the 2023 net international reserve accumulation target is being requested,” said the IMF communiqué, which was signed by Luis Cubeddu, Deputy Director of the IMF’s Western Hemisphere Department, and Ashvin Ahuja, Mission Chief for Argentina.

Argentine officials told the Herald that reserve targets will be lower both at quarterly and annual levels.

Argentina hit its 2022 reserve accumulation target of U$ 5 billion for 2022. According to its staff review published in December, the IMF mandated that Argentina should accumulate U$5.5 billion by the end of March, a very high volume considering the drought affecting the country and the resulting impossibility of the Central Bank to accumulate reserves. For 2023, Argentina was expected to reach U$9.8 billion in reserves — a U$4.8 billion increase compared to the 2022 target.

Market analysts estimate that the country’s total net reserves today are US$ 3.4 billion. 

The relaxation of reserve accumulation targets has been one of the government’s main’ demands to the IMF since last year. Since the talks ended in February 2022, the goals of the current agreement were negotiated without taking into account the impact of the war in Ukraine on the Argentine accounts, which the government contended should lead to a target review. The Ministry of Economy estimated that the increase in energy and freight prices generated a negative impact of US$5 billion on Argentina’s trade balance. 

The disbursement of US$ 5.3 billion from the IMF followed extensive negotiations between IMF staff and Argentine officials. Talks to evaluate the next stage of the agreement began in early February, when an IMF mission arrived in Buenos Aires to audit the evolution of the public accounts. The Argentine government expects the IMF’s official communication on the new agreement to be made today.


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