IMF concludes second loan review, backs Us$3.9-billion payment
Multilateral lender reaches staff-level agreement with Argentina, sends it to executive board; Fund praises “decisive” steps taken by Economy Minister Sergio Massa since taking office.
The International Monetary Fund (IMF) announced Monday that it had reached a staff-level agreement with Argentina for the second review of the country’s multi-billion-dollar debt restructuring deal, paving the way for the release of US$3.9 billion in fresh funds.
In a nod to the new leadership at the top of the portfolio, Fund officials also praised the “decisive” steps taken to get the Us$44.5-billion programme back on track after missing a key target.
The programme was derailed when Central Bank reserves declined, rather than rising as planned, due to an increase in import costs and a delay in receiving financing from the Inter-american Development Bank.
Argentina’s Extended Fund Facility (EFF) agreement, inked earlier this year between the multilateral lender and Buenos Aires, outlines conditions for the repayment of debt remaining from the record Us$57-billion creditline contracted by the Mauricio Macri administration back in 2018.
“IMF staff and the Argentine authorities have reached staff-level agreement on an updated macroeconomic framework and associated policies necessary to complete the second review under Argentina’s 30-month EFF arrangement. The agreement is subject to approval by the IMF Executive Board, which is expected to meet in the coming weeks. Upon completion of the review, Argentina would have access to about US$3.9 billion (SDR 3 billion),” the IMF said in a statement.
This is the second quarterly review of the deal and the first to take place since Argentina’s new economy minister, Sergio Massa, took office on August 3.
IMF staff were full of praise for Massa’s recent policy actions, describing them as “decisive” in a statement to the press.
“Recent decisive policy actions aimed at correcting earlier setbacks are helping to restore confidence and strengthen macroeconomic stability, including by rebuilding international reserves,” said IMF staff.
The review still needs approval by the IMF’S Executive Board, which will meet “in the coming weeks,” the multilateral lender said.
“The review focused on assessing progress since completion of the first review, updating the macroeconomic framework and reaching understandings on a solid policy package to continue to strengthen macroeconomic stability and secure sustained and inclusive growth,” read.a statement issued by the IMF’S head of mission team for Argentina, Luis Cubeddu.
“In this context, it was agreed that key objectives established at approval of the arrangement—including those related to the primary fiscal deficit and net international reserves—will remain unchanged through 2023. Such an approach provides a vital anchor to continue to rebuild credibility and sustain the reinvigorated commitment to implement the programme, around the authorities’ pillars of fiscal order and reserve accumulation,” it continued.
“Most of the programme’s targets for 2022 have been met, with the exception of the increase in foreign exchange reserves, due to a rise in imports,” Cubeddu said.
News of the staff-level agreement – and the tacit approval of the release of vital funds to boost the Central Bank’s reserves – will be welcomed by President Alberto Fernández’s government.
Under the terms of the deal, Argentina has committed to increasing international reserves and reducing its fiscal deficit from three percent of gross domestic product in 2021 to 2.5 percent this year, 1.9 percent in 2023 and 0.9 percent in 2024.
This is the 13th agreement between the IMF and Argentina since the country’s return to democracy in 1983.