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International Monetary Fund. Western Hemisphere Dept.
Inheriting an economy on the verge of a balance of payment crisis, the Milei administration implemented a stabilization plan centered on a strong fiscal anchor, an initial large step devaluation (followed by a crawling peg), and an ambitious deregulation agenda. This has yielded a rapid disinflation, the first primary surplus in almost two decades, an initial turnaround in reserves, and a strengthened balance sheet of the central bank, all of which contributed to sharply lower sovereign spreads. Despite the adjustment, the economy and real wages have been recovering since mid-2024, supporting rapid improvements in social indicators. Nevertheless, Argentina’s vulnerabilities and challenges are substantial, as external buffers remain very weak, inflation is still elevated, and many structural impediments to investment and employment persist. Recognizing remaining challenges and sharply rising global risks, the authorities are requesting medium-term balance of payments assistance under a new Extended Fund Facility (EFF) arrangement to address Argentina’s weak balance of payments position, maintain external and internal stability and create conditions for stronger and more sustainable growth.
Juliette Caucheteux
,
Jonas Nauerz
, and
Svetlana Vtyurina
Extreme weather has profoundly affected countries across South America (SA), given the importance of the agricultural sector for the economies. However, these effects have not yet been properly measured. In our study, we construct a unique dataset of high-frequency satellite data on temperature, precipitation, and a Normalized Difference Vegetation Index (NDVI) that proxies the agricultural yield in selected countries. In particular, we then examine the effect of droughts on agricultural yields (soy output) and find that they have a significant negative impact and that there is heterogeneity in the response across countries. While insurance could help protect farmers against severe losses, coverage in the region is low, and barriers remain high. Building on existing literature and using a calibrated structural model, we highlight the benefits of insurance for Total Factor Productivity (TFP) and offer some recommendations for its expansion.
Hany Abdel-Latif
and
Adina Popescu
This paper investigates the global economic spillovers emanating from G20 emerging markets (G20-EMs), with a particular emphasis on the comparative influence of China. Employing a Bayesian Global Vector Autoregression (GVAR) model, we assess the impacts of both demand-side and supply-side shocks across 63 countries, capturing the nuanced dynamics of global economic interactions. Our findings reveal that China's contribution to global economic spillovers significantly overshadows that of other G20-EMs. Specifically, China's domestic shocks have significantly larger and more pervasive spillover effects on global GDP, inflation and commodity prices compared to shocks from other G20-EMs. In contrast, spillovers from other G20-EMs are more regionally contained with modest global impacts. The study underscores China's outsized role in shaping global economic dynamics and the limited capacity of other G20-EMs to mitigate any potential negative implications from China's economic slowdown in the near term.
International Monetary Fund. Western Hemisphere Dept.

1. This report presents an Ex-Post Evaluation (EPE) of Argentina's 2022 extended arrangement supported by the Extended Fund Facility (2022 EFF). The 30-month arrangement, with access of SDR 31.914 billion (1,001.3 percent of Argentina's quota), was approved in March 2022. Of the 10 scheduled reviews, eight were completed. Given the exceptional access (EA) nature of the arrangement, this EPE seeks to assess: (i) whether the macroeconomic strategy, program design, and financing were appropriate to address the challenges Argentina faced and in line with Fund policy; (ii) whether outcomes under the program met program objectives; and (iii) evaluation of the judgments made in applying exceptional access policy, including on the member’s capacity to repay the Fund and the identified risks to the Fund.1

International Monetary Fund. Western Hemisphere Dept.
This paper analyzes Argentina’s Ex-post Evaluation of Exceptional Access under the 2022 Extended Fund Facility (EFF) Arrangement. The 2022 EFF came about in extremely difficult circumstances. Argentina was unable to regain external viability under the 2018 Stand-By Arrangement and faced large and concentrated repurchase obligations to the IMF. The combination of a gradualist reform strategy, large adverse shocks, and progressively weaker implementation resulted in outcomes substantially worse than in the baseline by end-2023. The program got off to a difficult start, with the surge in global commodity prices due to Russia’s war in Ukraine feeding inflation expectations and creating additional fiscal spending needs that were met through direct and indirect monetization, further fueling inflation. A major course correction subsequently undertaken by the Milei government—notably a sharp fiscal consolidation, an upfront devaluation, and an end to monetary financing of the budget helped Argentina avert a full-blown crisis and make important strides toward macroeconomic stabilization. Overall, the 2022 EFF did not achieve its original macroeconomic objectives, but it was successful in easing the burden of Argentina’s financial obligations to the IMF by rescheduling repayments over 2026–2034, and may have helped Argentina avoid even worse outcomes in 2022–2023.
Peter Lindner
,
Ananthakrishnan Prasad
, and
Jean-Marie Masse
This paper reviews the main types of credit enhancement approaches used to support climate debt issuances by EMDE borrowers. Fragmentation on the part of the providers of credit enhancements was identified as a major factor impeding scalability of credit-enhanced debt. The acceptance of credit-enhanced debt is also hampered by the structural characteristics of the capital markets, especially the fragmentation of the investor base. To place significant amounts of credit-enhanced climate debt with private sector investors, MDBs, DFIs, and other stakeholders should focus on simple and replicable debt structures. Securitizations and investment funds could help fund private sector climate investments in EMDEs.
International Monetary Fund. Western Hemisphere Dept.

We would like to thank staff for the Ex-Post Evaluation of Exceptional Access Under the 2022 Extended Fund Facility Arrangement, and to commend the team led by Mr. Abbas and Mr. Mirzoev for the remarkable job in preparing the insightful report, along with the worthy engagement with my authorities and other relevant stakeholders. We appreciate the candid, thorough, and balanced paper, including the valuable lessons learnt as a virtuous improvement process, particularly in this very visible relationship of the IMF with Argentina within the exceptional access framework.

Vivek B Arora
,
Miguel de Las Casas
,
Yasemin Bal GĂĽndĂĽz
,
Jérémie Cohen-Setton
,
Kelsie J Gentle
,
Jiakun Li
,
Carmen Rollins
, and
Sandra Saveikyte

Abstract

The evaluation assesses the EAP’s rationale, evolution, and implementation during the period since its adoption in 2002. It assesses whether the EAP has fulfilled the objectives that guided its creation, namely, shaping members’ and market expectations, providing clearer benchmarks for Board decisions on program design and exceptional access, safeguarding the Fund’s resources, and helping to ensure uniformity of treatment of members. The evaluation draws on background papers comprising both thematic and country studies that draw on experience with the 38 exceptional access programs completed through mid-2023. The thematic papers analyze the rationale and evolution of the EAP as well as the three building blocks of the policy: the exceptional access criteria, enhanced Board decision-making procedures, and ex post evaluations. The country papers comprise both cross-country studies and country-specific studies of the completed programs with Argentina (2018), Ecuador (2020), and Egypt (2020).