Front Matter Page
INTERNATIONAL MONETARY FUND
IMF Country Report No. 18/374
ARGENTINA
SECOND REVIEW UNDER THE STAND-BY ARRANGEMENT; FINANCING ASSURANCES REVIEW; AND REQUEST FOR MODIFICATION OF PERFORMANCE CRITERION—PRESS RELEASE; AND STAFF REPORT
December 2018
In the context of the Second Review under the Stand-By Arrangement, the following documents have been released and are included in this package:
A Press Release including a statement by the Chair of the Executive Board.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on December 19, 2018, following discussions that ended on November 16, 2018, with the officials of Argentina on economic developments and policies underpinning the Stand-By Arrangement. Based on information available at the time of these discussions, the staff report was completed on December 11, 2018.
A Debt Sustainability Analysis prepared by the staff of the IMF.
A Staff Statement updating information on recent developments.
The documents listed below have been or will be separately released.
Letter of Intent sent to the IMF by the authorities of Argentina*
Memorandum of Economic and Financial Policies by the authorities of Argentina*
Technical Memorandum of Understanding*
*Also included in Staff Report
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
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International Monetary Fund
Washington, D.C.
© 2018 International Monetary Fund
Front Matter Page
INTERNATIONAL MONETARY FUND
ARGENTINA
SECOND REVIEW UNDER THE STAND-BY ARRANGEMENT, FINANCING ASSURANCES REVIEW, AND REQUEST FOR MODIFICATION OF PERFORMANCE CRITERION
December 11, 2018
Context. The redesigned IMF-supported economic reform program is bearing early results. Financial markets have stabilized since end-September, following the adoption of the new monetary policy framework. After the appreciation of the currency in October, the peso has floated within the non-intervention zone. Short-term interest rates have fallen back to their end-September level. The passage of the 2019 Budget with broad political support has helped solidify confidence in the authorities’ stabilization plan. As a result, demand for Argentine bonds has strengthened and sovereign risk premia have narrowed.
All quantitative performance criteria for end-October were met. The end-November structural benchmark to pass the 2019 budget was met and so was the end-December structural benchmark to provide resources to the Congressional Budget Office. The end-October structural benchmark to submit a three-year budget to Congress was delayed (the authorities submitted it to Congress in mid-November as a prior action for the completion of the second review). However, the passage of the wealth tax, that was part of the fiscal program and an end-November structural benchmark was approved with delay on December 5.
Focus of review. Discussions centered on the 2019 budget, the appropriate calibration of monetary policy, and steps to improve debt management.
Outlook and risks. Economic activity is expected to gradually recover in 2019 and inflation should fall over the next few months. However, a worsening of global financial conditions, a shift in confidence in Argentina’s policy plans, and/or uncertainty associated to the 2019 electoral cycle could reignite capital account and budgetary financing pressures. Worsening economic activity and more persistent inflationary pressures could weaken public support for the government’s policy framework in the months ahead. As such, the success of the program relies on the authorities’ steadfast determination to implement their policy plan while continuing to take measures to mitigate the impact on the most vulnerable segments of the population. Clear and consistent communication efforts will be needed to guide expectations, maintain broad-based public support, and foster market confidence.
Approved By
Nigel Chalk (WHD) and Zuzana Murgasova (SPR)
A mission team visited Buenos Aires on November 8-16, 2018. The team consists of R. Cardarelli (head), D. Plotnikov, M. Shamloo, J. Wong (all WHD), M. Candia (COM), P. Dudine (FAD), J. Menkulasi (SPR), and R. Veyrune (MCM). The mission was aided by T. Alleyne (resident representative), A. Aghababyan, A. Diaz, J. Sarmiento-Monroy, and I. Sirbu. Mr. Lopetegui (OED) participated in most meetings.
Contents
STABILIZING THE ECONOMY
OUTLOOK AND RISKS
PROGRAM IMPLEMENTATION
ENTRENCHING FISCAL DISCIPLINE
BRINGING DOWN INFLATION
IMPROVING TREASURY DEBT MANAGEMENT
IMPROVING GOVERNANCE AND FIGHTING CORRUPTION
PROGRAM ISSUES
EXCEPTIONAL ACCESS CRITERIA
STAFF APPRAISAL
BOX
1. Improving Governance in Argentina
FIGURES
1. Recent Market Developments
2. FX and Monetary Developments
3. External Debt Sustainability: Bound Tests
TABLES
1. Selected Economic and Financial Indicators
2. Summary Balance of Payments
3. Consolidated Public Sector Operations
4. Federal Government Operations
5a. Summary Operations of the Central Bank
5b. Summary Operations of the Banking Sector
5c. Summary Operations of the Central Bank (Monthly 2018)
5d. Summary Operations of the Central Bank (Monthly 2019)
6. External Debt
7. Public Debt
8. Federal Government Gross Financing Needs and Sources (US$mn)
9. External Gross Financing Needs and Sources (US$mn)
10. Schedule of Reviews and Purchases
11. Quantitative Performance Criteria and Indicative Targets
12. Structural Program Conditionality
13. Indicators of Fund Credit, 2018-26
14. External Debt Sustainability Framework, 2013-23
ANNEX
I. Public Debt Sustainability Analysis
APPENDIX
I. Letter of Intent
Attachment I. Memorandum of Economic and Financial Policies
Attachment II. Technical Memorandum of Understanding
Front Matter Page
Press Release No. 18/485
FOR IMMEDIATE RELEASE
December 19, 2018
International Monetary Fund
Washington, D.C. 20431 USA
Front Matter Page
December 18, 2019
