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Montevideo, June 18th 2018 - 22:59 UTC

IMF and Argentina agree on a 36-month US$ 50bn Stand-By Arrangement

Friday, June 8th 2018 - 07:30 UTC
Full article 4 comments
Christine Lagarde said the plan is owned and designed by the Argentine government, aimed at strengthening the economy for the benefit of all Argentines Christine Lagarde said the plan is owned and designed by the Argentine government, aimed at strengthening the economy for the benefit of all Argentines
At the core of the government’s economic plan is a rebalancing of the fiscal position and restoring the primary balance by 2020 At the core of the government’s economic plan is a rebalancing of the fiscal position and restoring the primary balance by 2020
IMF strongly support the redoubling of efforts to lower inflation, which eats into the core of economic prosperity and is borne directly by society’s most vulnerable. IMF strongly support the redoubling of efforts to lower inflation, which eats into the core of economic prosperity and is borne directly by society’s most vulnerable.
IMF endorses central bank’s decision to adopt realistic and meaningful inflation targets and commitment to maintain a flexible market-determined exchange rate. IMF endorses central bank’s decision to adopt realistic and meaningful inflation targets and commitment to maintain a flexible market-determined exchange rate.

The Argentine authorities and IMF staff have reached an agreement on a 36-month Stand-By Arrangement (SBA) amounting to US$50 billion (equivalent to about SDR 35.379 billion or about 1,110% of Argentina’s quota in the IMF). This staff-level agreement will be subject to approval by the IMF’s Executive Board, which will consider Argentina’s economic plan in the coming days.

The authorities have indicated that they intend to draw on the first tranche of the arrangement but subsequently treat the loan as precautionary.

Ms. Christine Lagarde, Managing Director of the International Monetary Fund (IMF), issued the following statement on the staff level agreement:

“I congratulate the Argentine authorities on reaching this agreement. As we have stressed before, this is a plan owned and designed by the Argentine government, one aimed at strengthening the economy for the benefit of all Argentines. I am pleased that we can contribute to this effort by providing our financial support, which will bolster market confidence, allowing the authorities time to address a range of long-standing vulnerabilities. As part of this support, both the IMF and the Argentine government intend to work together to ensure steps are taken, and the resources are fully available, to protect the most vulnerable in the population as economic reforms move forward.

“At the core of the government’s economic plan is a rebalancing of the fiscal position. We fully support this priority and welcome the authorities’ intention to accelerate the pace at which they reduce the federal government’s deficit, restoring the primary balance by 2020. This measure will ultimately lessen the government financing needs, put public debt on a downward trajectory, and as President Macri has stated, relieve a burden from Argentina’s back.

“We also strongly support the redoubling of efforts to lower inflation, which we know eats into the foundation of economic prosperity in Argentina and is borne directly by society’s most vulnerable. In this vein, we endorse the central bank’s decision to adopt realistic and meaningful inflation targets and their commitment to maintain a flexible and market-determined exchange rate. We are also encouraged by the authorities’ commitment to ensure legal independence and operational autonomy for the central bank and to immediately put an end to central bank financing of the federal deficit.

“A central plank of the authorities’ plan is to put in place measures that will offer opportunity and support to those living in poverty and for the less well-off members of Argentine society. As a clear signal of these priorities, the authorities have pledged to maintain a floor on social assistance spending. They are committed to ensuring that spending, as a share of GDP, does not decline during the next three years. Additionally, if social conditions worsen, there are provisions to further increase the budget allocation for social priorities.

“Finally, I am particularly supportive of the efforts to level the playing field between Argentine men and women notably by introducing reforms in the tax code and social legislation. This is also consistent with the agenda that President Macri has underlined during Argentina’s leadership of the G20.

“In sum, I believe that Argentina’s reforms deserve the support of the IMF and the international community and I look forward to soon discussing Argentina’s request for support with the IMF’s Executive Board.”

Top Comments

Disclaimer & comment rules
  • Marti Llazo

    They're going to need it, what with massive deficit spending continuing and having to pay some US$25 billion next year in debt coming due.

    Jun 08th, 2018 - 08:07 pm 0
  • Enrique Massot

    This is a significant effort to save the skin of Mauricio Macri, the darling of international financial community that has so far been heavily investing in Argentina.

    Indeed, even the terms of the $50-billion dollar agreement postpone reimbursement to the government to be elected in October 2019, giving the Macri government as many re-election chances as possible.

    However, the IMF worries about getting paid back--in order to ensure it, it has a number of requirements. Those are the usual ones: to press the lemon until it gives its last juice drop. Stimulation of the domestic productive sector and expansion through consumption is not in the cards--it never has been. More inflation and a contraction of the real economy will be the result.

    The Argentina neoliberals had once more shown to be so utterly rapacious, they are not even able to produce a sustainable model able to perpetuate through time. Just like the IMF, their logic is to squeeze as much as possible for them and their associates in the international finance where they also have stakes, until the dough--and the credit--is all gone.

    Not a single happy prospect.

    Jun 09th, 2018 - 05:06 pm 0
  • Enrique Massot

    The IMF won't “give” Argentina $50 billion US dollars.

    It will begin by sending $15 billion before the end of June, and subsequent disbursements will be conditional to Argentina fulfilling conditions that haven't yet been disclosed.

    In reality, what the champions of 'less state and more free market' have done is to ensure IMF public funds will enable Argentina to service its existing foreign debt, held by private investors.

    As those champions say, let's privatize profits and socialize the losses.

    Jun 10th, 2018 - 09:28 pm 0
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