Abstract
ARGENTINA
Title Page
ARGENTINA
SECOND REVIEW UNDER THE EXTENDED ARRANGEMENT UNDER THE EXTENDED FUND FACILITY, REQUESTS FOR WAIVERS OF APPLICABILITY AND NONOBSERVANCE OF PERFORMANCE CRITERIA, MODIFICATION OF PERFORMANCE CRITERIA, AND FINANCING ASSURANCES REVIEW—SUPPLEMENTARY INFORMATION
October 4, 2022
Approved By
Ilan Goldfajn, Luis Cubeddu (both WHD), Ceyla Pazarbasioglu, Andrea Schaechter (both SPR)
Prepared by the Argentina team of the Western Hemisphere Department
This supplement provides an update on developments since the issuance of the Staff Report (EBS/22/86) circulated to the Executive Board on September 26, 2022. Specifically, it provides details on recently released economic indicators and an update of program performance, including with respect to end-September performance criteria, which govern this review, and the structural agenda. The thrust of the staff appraisal remains unchanged.
Recent Developments and Program Performance
1. Consistent with the baseline projections, recently released data suggest an incipient and healthy deceleration in output growth. Economic activity remained flat (m/m) in July (down from 1.2 percent m/m in June), bringing expansion through the first seven months of the year to 6.4 percent (y/y). Growth has been fairly balanced across most sectors, supported by favorable labor market conditions, with rising participation rates and declining unemployment (reaching 6.9 percent in Q2:2022). Meanwhile, overall poverty rates fell further (to 36.5 percent in S1:2022 from 37.3 percent in S2:2021), although extreme poverty rose slightly (to 8.8 percent from 8.2 percent), largely reflecting the rise in food prices and despite increased social support.
2. Available data confirm that key end-September quantitative program targets have been met (See Table 1 and Figure 1).1
Argentina: Baseline Quantitative Performance Criteria and Indicative Targets 1/ 2/
(In Billions of Argentine Pesos, Unless Otherwise Stated)
Targets as defined in the Technical Memorandum of Understanding (TMU).
Based on program exchange rates defined in the TMU.
Flows from January 1 through December 31.
Includes intra-public sector transfers (transferencias figurativas).
Rebased assuming CPI=100 at end-2021. This target will no longer be part of program conditionality after
In billion s of U.S. dollars. The change is measured against the value of NIR on December 31, 2021, which stood at US$2.325 billion. It excludes payments to Paris Club from September 2022 onwards.
In billions of U.S. dollars. The stock of non-deliverable futures on December 31, 2021 stood at US$ 4.185 billion, as defined in the TMU.
Targets subject to adjustors as defined in the TMU.
Argentina: Baseline Quantitative Performance Criteria and Indicative Targets 1/ 2/
(In Billions of Argentine Pesos, Unless Otherwise Stated)
| 2022 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| end-June | end-Sept | |||||||||
| Target | Adjusted | Actual | Status | CR 22/192 | Adjusted | Actual | Status | Proposed | ||
| Fiscal targets | ||||||||||
| Performance Criteria | ||||||||||
| 1. Cumulative floor on the federal government primary balance 3/ 8/ | -874.4 | -849.0 | -800.7 | Met | -1142.1 | n.a. | n.a. | n.a. | -1156.8 | |
| 2. Ceiling on the federal government stock of domestic arrears 4/ | 612.2 | … | 489.4 | Met | 612.2 | … | n.a. | n.a. | 654.0 | |
| Continuous Performance Criterion | ||||||||||
| 3. Non-accumulation of external debt payments arrears by the federal government | 0.0 | … | 0.0 | Met | 0.0 | … | 0.0 | Met | … | |
| Indicative Targets | ||||||||||
| 4. Cumulative floor on real federal government revenues 3/ 5/ | 5179.7 | … | 5169.6 | Not met | 7763.9 | … | n.a. | n.a. | … | |
| 5. Cumulative floor on federal government spending on social assistance program | 332.2 | … | 343.4 | Met | 542.1 | … | n.a. | n.a. | 565.3 | |
| Monetary targets | ||||||||||
| Performance Criteria | ||||||||||
| 6. Cumulative floor on the change in net international reserves of BCRA 6/ 8/ | 3.450 | 2.950 | 2.655 | Not met | 4.100 | 3.600 | 4.627 | Met | … | |
| 7. Cumulative ceiling on central bank financing of the federal government 3/ | 475.8 | … | 435.1 | Met | 665.4 | … | 620.1 | Met | … | |
| Indicative Target | ||||||||||
| 8. Ceiling on the central bank stock of non-deliverable futures 7/ | 7.000 | … | 4.358 | Met | 9.000 | … | 3.130 | Met | … | |
Targets as defined in the Technical Memorandum of Understanding (TMU).
Based on program exchange rates defined in the TMU.
Flows from January 1 through December 31.
Includes intra-public sector transfers (transferencias figurativas).
Rebased assuming CPI=100 at end-2021. This target will no longer be part of program conditionality after
In billion s of U.S. dollars. The change is measured against the value of NIR on December 31, 2021, which stood at US$2.325 billion. It excludes payments to Paris Club from September 2022 onwards.
In billions of U.S. dollars. The stock of non-deliverable futures on December 31, 2021 stood at US$ 4.185 billion, as defined in the TMU.
Targets subject to adjustors as defined in the TMU.
Argentina: Baseline Quantitative Performance Criteria and Indicative Targets 1/ 2/
(In Billions of Argentine Pesos, Unless Otherwise Stated)
| 2022 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| end-June | end-Sept | |||||||||
| Target | Adjusted | Actual | Status | CR 22/192 | Adjusted | Actual | Status | Proposed | ||
| Fiscal targets | ||||||||||
| Performance Criteria | ||||||||||
| 1. Cumulative floor on the federal government primary balance 3/ 8/ | -874.4 | -849.0 | -800.7 | Met | -1142.1 | n.a. | n.a. | n.a. | -1156.8 | |
| 2. Ceiling on the federal government stock of domestic arrears 4/ | 612.2 | … | 489.4 | Met | 612.2 | … | n.a. | n.a. | 654.0 | |
| Continuous Performance Criterion | ||||||||||
| 3. Non-accumulation of external debt payments arrears by the federal government | 0.0 | … | 0.0 | Met | 0.0 | … | 0.0 | Met | … | |
| Indicative Targets | ||||||||||
| 4. Cumulative floor on real federal government revenues 3/ 5/ | 5179.7 | … | 5169.6 | Not met | 7763.9 | … | n.a. | n.a. | … | |
| 5. Cumulative floor on federal government spending on social assistance program | 332.2 | … | 343.4 | Met | 542.1 | … | n.a. | n.a. | 565.3 | |
| Monetary targets | ||||||||||
| Performance Criteria | ||||||||||
| 6. Cumulative floor on the change in net international reserves of BCRA 6/ 8/ | 3.450 | 2.950 | 2.655 | Not met | 4.100 | 3.600 | 4.627 | Met | … | |
| 7. Cumulative ceiling on central bank financing of the federal government 3/ | 475.8 | … | 435.1 | Met | 665.4 | … | 620.1 | Met | … | |
| Indicative Target | ||||||||||
| 8. Ceiling on the central bank stock of non-deliverable futures 7/ | 7.000 | … | 4.358 | Met | 9.000 | … | 3.130 | Met | … | |
Targets as defined in the Technical Memorandum of Understanding (TMU).
Based on program exchange rates defined in the TMU.
Flows from January 1 through December 31.
Includes intra-public sector transfers (transferencias figurativas).
Rebased assuming CPI=100 at end-2021. This target will no longer be part of program conditionality after
In billion s of U.S. dollars. The change is measured against the value of NIR on December 31, 2021, which stood at US$2.325 billion. It excludes payments to Paris Club from September 2022 onwards.
In billions of U.S. dollars. The stock of non-deliverable futures on December 31, 2021 stood at US$ 4.185 billion, as defined in the TMU.
Targets subject to adjustors as defined in the TMU.
Performance Relative Key Program Targets1
Citation: IMF Staff Country Reports 2022, 322; 10.5089/9798400221996.002.A002
Sources: National authorities and Fund staff calculations.1/ Targets apply only to the end-quarter. Data through September 30, 2022 for net international reserves, monetary financing and non-deliverable futures. The fiscal primary balance is based on data through August 30, 2022.Performance Relative Key Program Targets1
Citation: IMF Staff Country Reports 2022, 322; 10.5089/9798400221996.002.A002
Sources: National authorities and Fund staff calculations.1/ Targets apply only to the end-quarter. Data through September 30, 2022 for net international reserves, monetary financing and non-deliverable futures. The fiscal primary balance is based on data through August 30, 2022.Performance Relative Key Program Targets1
Citation: IMF Staff Country Reports 2022, 322; 10.5089/9798400221996.002.A002
Sources: National authorities and Fund staff calculations.1/ Targets apply only to the end-quarter. Data through September 30, 2022 for net international reserves, monetary financing and non-deliverable futures. The fiscal primary balance is based on data through August 30, 2022.Net international reserves (NIR) (performance criterion, PC). The cumulative change in NIR through end-September reached US$4.6 billion—versus an adjusted program floor of US$3.6 billion—largely driven by the, now expired scheme to incentivize the liquidation of soy stocks. The scheme, in place September 5-30, supported the settlement and sale of more than US$8 billion of soybean and derivatives. As noted in the Staff Report (¶23), measures are being considered to deal with the rapid widening of the trade services deficit.
Central bank financing of the federal government (PC). In line with the authorities’ commitment to cap monetary financing of the fiscal deficit to 0.8 percent of GDP in 2022, central bank financing of the federal government at end-September stood at ARS 620 billion, below the program ceiling of ARS 665 billion. In September, reduced reliance on BCRA transfers, was supported by strong net domestic debt placements of around 0.5 percent of GDP, with minimal BCRA intervention in the secondary bond market.
Central bank stock of non-deliverable futures (indicative target). The stock of non-deliverable futures (NDF) narrowed to US$3.1 billion by end-September, significantly below the program ceiling of US$9billion, notwithstanding some BCRA intervention in the NDF market in late September in response to volatile market conditions.
3. The recent publication of the National AML/CFT Strategy is a key milestone in preparation for an evaluation by the Financial Action Task Force (FATF) in 2023 (met end-September structural benchmark). The National Strategy, developed in consultation with key stakeholders and IMF staff, reflects recommendations to mitigate risks, vulnerabilities, and threats identified in the money laundering (ML) and terrorist financing (TF) national risk assessments. Key objectives of the strategy include: (i) harmonizing the AML/CFT legal and regulatory framework in line with FATF standard; (ii) strengthening the detection and application of sanctions related to ML/TF activities; and (iii) enhancing the identification of ultimate beneficial owners of legal persons/arrangements. Implementation is envisaged through 2024.
Fiscal data through end-August and preliminary tax revenue data for September—up on account of higher export duties from the soy stock liquidation—suggest good prospects of having met the end-September floor on the federal fiscal primary balance and the ceiling on domestic arrears (both unchanged as a share of GDP).
