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Western Hemisphere > Argentina

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Cover IMF Working Papers
The Sovereign-Bank Nexus in Emerging Markets in the Wake of the COVID-19 Pandemic
Andrea Deghi
,
Mr. Salih Fendoglu
,
Tara Iyer
,
Mr. Hamid R Tabarraei
,
Yizhi Xu
, and
Mustafa Yenice
The COVID-19 pandemic has brought the relationship between sovereigns and banks—the so-called sovereign-bank nexus—in emerging market economies to the fore as bank holdings of domestic sovereign debt have surged. This paper examines the empirical relevance of this nexus to assess how it could amplify macro-financial stability risks. The findings show that an increase in sovereign credit risk can adversely affect banks’ balance sheets and credit supply, especially in countries with less-well-capitalized banking systems. Sovereign distress can also impact banks indirectly through the nonfinancial corporate sector by constraining their funding and reducing their capital expenditure. Notably, the effects on banks and corporates are strongly nonlinear in the size of the sovereign distress.
Keywords:
Sovereign-bank nexus; emerging markets; financial stability; sovereign risk; COVID-19; banking sector; corporate investment; outcome variable; Annex I. data description; summary statistics; Emerging and frontier financial markets; Capital adequacy requirements; Commercial banks; Credit default swap; Global
Cover IMF Working Papers
Balance Sheets and Debt Crises – Empirical Regularities for Modern Cases of Sovereign Distress
Alexis Meyer-Cirkel
and
Gonzalo Huertas
Public and private sector balance sheets are an important component to any analysis of debt sustainability. A vulnerable and indebted private sector can become a sudden liability for the government; alternatively, resilient household and bank balance sheets may reveal potential sources of funding for the sovereign during times of fiscal distress. In this paper, we document empirical regularities in the behavior of macroeconomic variables during debt crises, and show how both macroeconomic fundamentals and sectoral net worth can affect the likelihood of undergoing default.
Keywords:
balance sheet dynamics; default probability; sectoral balance sheets; default episode; predicting default; banking sector balance sheet data; Financial statements; Commercial banks; Debt default; Global
Cover IMF Staff Country Reports
Paraguay: Request for Purchase Under the Rapid Financing Instrument-Press Release; Staff Report; and Statement by the Executive Director for Paraguay
International Monetary Fund. Western Hemisphere Dept.
This paper presents Paraguay’s Request for Purchase Under the Rapid Financing Instrument (RFI). In March 2020, Paraguay was hit by the Covid-19 epidemic, which has created fiscal and balance of payments needs. The authorities’ policy response to the epidemic has been timely, but limited access to financing and a weakened fiscal position constrain the ability to pursue a deeper emergency response. The Paraguayan authorities are requesting financial assistance under the IMF’s RFI to address the urgent balance of payments needs associated with the Covid-19 epidemic. Given the urgency of their request, there is no time to put in place a full-fledged upper credit tranche program, and the authorities are of the view that they can make suitable adjustments to manage their medium-term balance of payments challenges. In order to prevent the emergence of permanently high deficits after the crisis, Paraguay should return to the deficit ceiling under the Fiscal Responsibility Law. The exchange rate should continue to function as shock absorber, and monetary policy should focus on inflation targeting.
Keywords:
ISCR; CR; emergency package; monetary policy committee; support; balance of payments pressure; donor support; Executive Board discussion; Credit; Exchange rates; East Asia; Global; COVID-19
Cover Policy Papers
Safeguards Assessment—2019 Update
Mr. George M Kabwe
,
Elie Chamoun
,
Riaan van Greuning
,
Mowele Mohlala
, and
Ms. Julia Cardoso
Safeguards assessments are a key pillar of the risk management arrangements for IMF lending. Safeguards assessments aim to mitigate the risks of misuse of Fund resources and misreporting of program monetary data under Fund arrangements. Safeguards assessment reports are confidential and therefore the IMF Executive Board is provided with a periodic report on safeguards activities on a biennial basis, in addition to high-level summaries in member country staff reports on key findings and recommendations. This update on safeguards activity covers the period May 2017 to end-April 2019 (the period).
Keywords:
PP; central bank; governance; audit; risk management framework; lending; governance arrangement; central bank participant; central bank autonomy provision; central bank safeguards framework; central bank authority; Internal audit; Central bank governance; External audit; Auditing; Monetary statistics; Global; Middle East; Western Hemisphere; West Africa; Europe
Cover Selected Decisions and Selected Documents of the International Monetary Fund, Fortieth Issue
Selected Decisions and Selected Documents of the International Monetary Fund, Fortieth Issue
International Monetary Fund. Legal Dept.

Abstract

This volume is the Fortieth Issue of Selected Decisions and Selected Documents of the IMF. It includes decisions, interpretations, and resolutions of the Executive Board and the Board of Governors of the IMF, as well as selected documents, to which frequent reference is made in the current activities of the IMF. In addition, it includes certain documents relating to the IMF, the United Nations, and other international organizations. As with other recent issues, the number of decisions in force continues to increase, with the decision format tending to be longer given the use of summings up in lieu of formal decisions. Accordingly, it has become necessary to delete certain decisions that were included in earlier issues, that is, those that only completed or called for reviews of decisions, those that lapsed, and those that were superseded by more recent decisions. Wherever reference is made in these decisions and documents to a provision of the IMF’s Articles of Agreement or Rules and Regulations that has subsequently been renumbered by, or because of, the Second Amendment of the Fund’s Articles of Agreement (effective April 1, 1978), the corresponding provision currently in effect is cited in a footnote.

Keywords:
SELD; fund; holding; capital transfer; usable currency; use of fund's resource; Japanese yen; signature authority decision; Currencies; Credit; Loans; Poverty reduction strategy; International monetary system; Global; West Africa; Caribbean; Institutional View on capital flows; Multiple currency practices
Cover IMF Staff Country Reports
Uruguay: 2018 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Republic of Uruguay
International Monetary Fund. Western Hemisphere Dept.
This Article IV Consultation highlights that Uruguay has preserved macroeconomic stability in the wake of the turbulence in the region due to prudent policies and the accumulation of buffers over the years. With the worsening outlook and less friendly external environment, in the near term, policies should focus on maintaining resilience. In this context, additional efforts are needed to put debt on a firm downward trajectory and reduce inflation to within the target band. The IMF staff assesses that the external position is broadly consistent with fundamentals and desirable policy settings. The authorities and IMF staff have remained in broad agreement on the macroeconomic policy objectives, including maintaining public debt on a sustainable trajectory, keeping inflation low, and allowing exchange rate to adjust in line with fundamentals. Fiscal adjustment, however, has not proceeded as quickly as had been originally expected, and inflation has proven difficult to contain within the authorities’ target range.
Keywords:
ISCR; CR; center; Uruguay; bank assets; consumer price index; asset; public-sector asset-liability management; Uruguay's case; growth outlook; merchandise export; Uruguay's growth; Uruguay's export; Uruguay's exposure; liability positions vis-à-vis nonresident; Public sector; Inflation; Fiscal stance; Global; annex I.External sector assessment; IMF's transparency policy; I.External sector assessment; inflation expectation; Caribbean
Cover IMF Staff Country Reports
Bolivia: 2018 Article IV Consultation-Press Release and Staff Report
International Monetary Fund. Western Hemisphere Dept.
After years of impressive growth and poverty reduction, Bolivia is facing a more challenging period. Accommodative fiscal and monetary policies combined with lower gas and minerals prices have contributed to continued large twin deficits, foreign reserve losses, and a sharp increase in public debt. External competitiveness has been negatively affected by the appreciating US dollar, high wage growth, and domestic policies that have hindered private sector investment. A definitive change in the policy stance is warranted to restore external balance, minimize a further buildup in vulnerabilities, and promote broad based growth.
Keywords:
ISCR; CR; fiscal policy; commodity; exchange rate; U.S. dollar; central bank; exchange regime; accommodative fiscal policy; boom period; Public investment and public-private partnerships (PPP); Credit; Commodity prices; Public sector; Global
Cover Global Financial Stability Report, October 2018
Global Financial Stability Report, October 2018
A Decade after the Global Financial Crisis: Are We Safer?
International Monetary Fund. Monetary and Capital Markets Department

Abstract

In the 10 years since the global financial crisis, regulatory frameworks have been enhanced and the banking system has become stronger, but new vulnerabilities have emerged, and the resilience of the global financial system has yet to be tested.

Keywords:
GFSR; financial condition; market liquidity; emerging market economy; IMF executive board discussion summary; risk; a number of emerging market economies; debt vulnerability; foreign exchange; inflation surprise; Emerging and frontier financial markets; Financial sector stability; Global financial crisis of 2008-2009; Financial Sector Assessment Program; Bank resolution framework; Global; Asia and Pacific; Africa; Middle East; financial system; commercial paper; FSAP risk analysis finding; volatility Index; U.S. dollar; international community; Systemic risk; Caribbean
Cover Prevention and Resolution of Sovereign Debt Crises
Prevention and Resolution of Sovereign Debt Crises
Ms. Julianne Ams
,
Mr. Tamon Asonuma
,
Mr. Wolfgang Bergthaler
,
Ms. Chanda M DeLong
,
Ms. Nouria El Mehdi
,
Mr. Mark J Flanagan
,
Mr. Sean Hagan
,
Ms. Yan Liu
,
Charlotte J. Lundgren
,
Mr. Martin Mühleisen
,
Alex Pienkowski
,
Mr. Gustavo Pinto
, and
Mr. Eric Robert

Abstract

“The IMF’s Role in the Prevention and Resolution of Sovereign Debt Crises” provides a guided narrative to the IMF’s policy papers on sovereign debt produced over the last 40 years. The papers are divided into chapters, tracking four historical phases: the 1980s debt crisis; the Mexican crisis and the design of policies to ensure adequate private sector involvement (“creditor bail-in”); the Argentine crisis and the search for a durable crisis resolution framework; and finally, the global financial crisis, the Eurozone crisis, and their aftermaths.

Keywords:
SLIPS; debt; crisis; financing; fund; IMF support; IMF policy response; policy development; IMF responsibility; crisis resolution role; fund support; Global; Eastern Europe; Sovereign debt restructuring; Sovereign bonds; Arrears; Commercial banks; fund policy; IMF's policy; IMF approval
Cover IMF Staff Country Reports
Argentina: Request for Stand-By Arrangement-Press Release and Staff Report
International Monetary Fund. Western Hemisphere Dept.
Despite a difficult economic context, President Macri’s administration, over the past two and a half years, has taken bold steps to eliminate a wide range of distortions in the economy. Efforts were also made to strengthen institutions (including the complete reconstruction of the statistics agency, in an effort to restore credibility to Argentine data), as well as an assertive effort to tackle corruption. Despite these efforts, a gradual approach to fiscal consolidation, combined with a tightening of global financial conditions, a poor harvest, and the introduction of a tax on nonresident holdings of short-term central bank paper, generated significant anxiety among market participants. Starting in mid-April, Argentina came under abrupt balance of payments pressures as both domestic and foreign investors decided to liquidate their position in onshore peso assets. To stem the outflows, the authorities significantly increased short-term interest rates, tightened fiscal policy, and sold foreign exchange. Shortly after taking these steps the government announced its intention to approach the IMF for an exceptional access Stand-By Arrangement.
Keywords:
ISCR; CR; FX auction; Argentina; auction; auction rate; price; price auction; auction participant; trading-hours FX intervention; Fiscal stance; Inflation; Debt service; Global