IMF Reaches Staff-Level Agreement with Argentina on a Three-Year, US$50 Billion Stand-By Arrangement
The Argentine authorities and IMF staff have reached an agreement on a 36-month Stand-By Arrangement (SBA) amounting to US$50 billion (equivalent to about SDR 35.379 billion or about 1,110 percent of Argentina’s quota in the IMF). This staff-level agreement will be subject to approval by the IMF’s Executive Board, which will consider Argentina’s economic plan in the coming days. The authorities have indicated that they intend to draw on the first tranche of the arrangement but subsequently treat the loan as precautionary.
“There is no magic: the IMF can help but Argentines need to resolve our own problems,” the treasury minister said at a news conference on Thursday. Nicolás Dujovne said he expected the IMF board to approve the deal during a meeting on 20 June. After that, he said he expected an immediate disbursement of 30% of the funding, or about $15bn.
Argentina will seek to reduce its fiscal deficit to 1.3% of gross domestic product in 2019, down from 2.2% previously, Dujovne said. The deal calls for fiscal balance in 2020 and a fiscal surplus of 0.5% of GDP in 2020.
Ms. Christine Lagarde, Managing Director of the International Monetary Fund (IMF), issued the following statement on the staff level agreement:
“I congratulate the Argentine authorities on reaching this agreement. As we have stressed before, this is a plan owned and designed by the Argentine government, one aimed at strengthening the economy for the benefit of all Argentines. I am pleased that we can contribute to this effort by providing our financial support, which will bolster market confidence, allowing the authorities time to address a range of long-standing vulnerabilities. As part of this support, both the IMF and the Argentine government intend to work together to ensure steps are taken, and the resources are fully available, to protect the most vulnerable in the population as economic reforms move forward.
“At the core of the government’s economic plan is a rebalancing of the fiscal position. We fully support this priority and welcome the authorities’ intention to accelerate the pace at which they reduce the federal government’s deficit, restoring the primary balance by 2020. This measure will ultimately lessen the government financing needs, put public debt on a downward trajectory, and as President Macri has stated, relieve a burden from Argentina’s back.
“We also strongly support the redoubling of efforts to lower inflation, which we know eats into the foundation of economic prosperity in Argentina and is borne directly by society’s most vulnerable. In this vein, we endorse the central bank’s decision to adopt realistic and meaningful inflation targets and their commitment to maintain a flexible and market-determined exchange rate. We are also encouraged by the authorities’ commitment to ensure legal independence and operational autonomy for the central bank and to immediately put an end to central bank financing of the federal deficit.
“A central plank of the authorities’ plan is to put in place measures that will offer opportunity and support to those living in poverty and for the less well-off members of Argentine society. As a clear signal of these priorities, the authorities have pledged to maintain a floor on social assistance spending. They are committed to ensuring that spending, as a share of GDP, does not decline during the next three years. Additionally, if social conditions worsen, there are provisions to further increase the budget allocation for social priorities.
“Finally, I am particularly supportive of the efforts to level the playing field between Argentine men and women notably by introducing reforms in the tax code and social legislation. This is also consistent with the agenda that President Macri has underlined during Argentina’s leadership of the G20.
“In sum, I believe that Argentina’s reforms deserve the support of the IMF and the international community and I look forward to soon discussing Argentina’s request for support with the IMF’s Executive Board.”
IMF Communications Department