The International Monetary Fund (IMF) has reached an agreement with the Argentine government on the fifth and sixth reviews of the country’s aid package, paving the way for a disbursement of US$7.5 billion, amid challenging conditions due to drought.
In 2022, the IMF and Argentina agreed on a credit program, under which Argentina receives US$44 billion over 30 months, in return for President Alberto Fernandez’s commitment to increase international reserves and reduce the fiscal deficit, from 3% of GDP in 2021 to 2.5% in 2022, 1.9% in 2023, and 0.9% in 2024.
The agreement, at the technical staff level, will provide Argentina with about US$7.5 billion, subject to the government implementing the agreed measures and the approval of the Board, meeting in the second half of August.
The disbursements will be made in two installments, one in the third week of August and the other in the first week of November, declared Argentina’s Economy Minister, Sergio Massa, who is also a presidential candidate for the ruling center-left Peronist coalition.
The funds provide much-needed support for Massa, who accuses the opposition of attempting to obstruct the agreement, which was achieved after weeks of intense negotiations.
Since the completion of the fourth review on March 31, Argentina’s economic situation has become challenging due to the greater than expected impact of the drought on exports and fiscal revenues.
Despite deviations and delays in policies contributing to strong domestic demand and a weaker trade balance, the IMF is confident that the government will apply corrective actions and meet key targets.
The agreed-upon policy aims to increase reserves over the year, with a target of accumulating net international reserves of about US$1 billion by the end of 2023.
The IMF anticipates that the Argentine government will benefit from improvements in the energy balance and the expected recovery from the drought.
The Argentine government agreed to implement the measures over the coming weeks and months, proactively adapt to evolving external and internal conditions, and keep up with its financial obligations to the Fund.