The Executive Board of the International Monetary Fund (IMF) today approved an augmentation to SDR 10.6 billion (about US$14 billion) of Argentina’s stand-by credit first approved on March 10, 2000 (see Press Release 00/17). SDR 2.1 billion (about US$3 billion) of the augmented total will be provided under the Supplemental Reserve Facility (SRF). Today’s decision was made in conjunction with the completion of the second review of Argentina’s program under the original stand-by credit and makes SDR 2.25 billion (about US$3 billion) available immediately. Three additional drawings of SDR 976.2 million (about US$1.3 billion) each will be made available during the remainder of 2001 following the completion of further review of the program, the first of which expected to take place towards the end of the first quarter. Further credit will be made available, according to a schedule yet to be specified, in 2002 (SDR 3 billion or about US$4 billion), and in 2003 (SDR 764 million or about US$1 billion).
To ease the government financing constraint in 2001 and subsequent years, the Argentine authorities have arranged a financial support package totaling about US$39.7 billion from official and private sources. In addition to the IMF support outlined above, the package includes about US$5 billion in new loan commitments from the Inter-American Development Bank and the World Bank, and US$1 billion in a loan from Spain. The package also includes about US$20 billion of financing from the private sector that relies on a market-based, voluntary approach intended to complement Argentina’s objective of accessing international capital markets as soon as confidence returns.
Following the Executive Board discussion, Stanley Fischer, First Deputy Managing Director and Acting Chairman of the Board said:
“The Argentine government has embarked on a comprehensive and ambitious program aimed at promoting economic growth and ensuring medium-term sustainability of the fiscal and external financial situations, thus restoring confidence at home and abroad. The program contains measures to promote investment, including the elimination of tax disincentives in this area, the creation of a private sector infrastructure fund, and an increase in public investment. It also includes important structural fiscal reforms intended to ensure fiscal sustainability and reduce the public debt burden over the medium term. Key elements in this regard are the new fiscal pact with the provinces, the reform to the social security system, and measures to improve tax enforcement It will be important that the authorities at all levels of government adhere firmly to the economic program so as to restore market confidence, return the economy to a higher growth path, and protect the country’s convertibility regime.
“The structural reform agenda aims at promoting competition in domestic markets and improving competitiveness. The main elements in the program in this regard are: the opening of the national health care system to competition, the deregulation and promotion of competition in key sectors, such as energy and telecommunications, the renegotiation of expiring contracts with privatized enterprises, the elimination over two years of the 3 percent import surcharge, and the continued implementation of the labor reform approved by congress in May 2000.
“The authorities’ commitment to these policies has warranted extraordinary support from the international community, as well as the voluntary and constructive involvement of the private sector in providing the required financing. It is essential that these commitments be translated into sustained action, with the support of Argentine society.
“Market reactions to the program and recent external developments have been positive: spreads on Argentine bonds and domestic interest rates have declined significantly in recent weeks and the stock market has rebounded strongly. These developments bode well for a recovery of confidence and economic activity in the period ahead,” Fischer said.
A member’s quota in the IMF determines, in particular, the amount of its subscription, its voting weight, its access to IMF financing, and its allocation of SDRs.