Argentina obtains a $7.5 billion bailout package
Argentina obtained a $7.5 billion bailout package from the IMF to avert default. After Sri Lanka and Pakistan, Argentina is the third country to receive a bailout package from the IMF in default-like situation.
The IMF issued the following statement today following conclusions of discussions on the combined fifth and sixth reviews of the EFF arrangement for Argentina.
“The Argentine authorities and IMF staff reached a staff-level agreement on a policy package and updated macroeconomic framework to complete the combined fifth and sixth reviews under Argentina’s 30-month EFF arrangement.
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 to about US$7.5 billion. The proposed combination of reviews and associated disbursement are intended to support Argentina’s policy efforts and near-term balance of payments needs, including obligations to the Fund. The next review is expected to take place in November.
Since the completion of the fourth review, Argentina’s economic situation has become very challenging due to the larger-than-anticipated impact of the drought, which had a significant impact on exports and fiscal revenues. There have also been policy slippages and delays, which have contributed to strong domestic demand and a weaker trade balance.
As a result, the end-June 2023 performance criteria (PCs) for net international reserves (NIR) accumulation, the primary fiscal balance, and monetary financing of the fiscal deficit were not reached. Meanwhile, the introduction of new temporary administrative FX measures, including in recent days, has occasioned the nonobservance of PCs against the introduction of multiple currency practices (MCPs). As such, waivers will be requested, as well as modifications of key targets, on the basis of the agreed corrective actions to strengthen the program.”
“Given this context, the discussions focused on reaching an agreement on a policy package to rebuild reserves and enhance fiscal order. Safeguarding stability and addressing underlying imbalances—high inflation and low reserve coverage–are fundamental to securing more sustainable, resilient, and inclusive growth over the medium term. The agreement was reached in the following key areas:
FX and monetary policy.
- A strengthening and harmonization of the FX regime remain fundamental to durably improve reserve coverage and external stability, and measures have been taken to encourage export liquidation and contain imports in the near term. The rate of the crawl will continue to be used to preserve competitiveness and support reserve accumulation goals.
- To sustain peso demand and address high inflation, the authorities plan to continue to ensure that policy rates remain sufficiently positive in real terms. In addition, monetary policy will remain a key instrument to contain market pressures, with interventions in the parallel and futures FX markets focused on addressing disorderly conditions.
