The extensive statement from the International Monetary Fund describes the commitments undertaken by Argentina in key variables. In exchange, it will receive disbursements of $4.7 billion.
Disbursements
Subject to approval by the Executive Board of the International Monetary Fund, Argentina would have access to approximately $4.7 billion.
Fiscal surplus
The Argentine government proposes to achieve a primary surplus of 2% of GDP this year through a combination of revenue and spending measures. Revenues are expected to be temporarily supported by higher trade-related taxes and gains from the normalization of agricultural production.
Spending cuts
Spending rationalization will be supported by reductions in administrative costs, energy and transport subsidies, discretionary transfers to provinces and state-owned enterprises, and lower-priority infrastructure spending. The initial measures will be complemented by efforts over time to safeguard an overall fiscal balance, through high-quality improvements in the efficiency of tax and spending systems.
Social spending
Authorities have significantly strengthened social assistance through family allowance and food stamp programs, moving away from social programs distributed through expensive intermediaries. Their plan is to preserve the real value of pensions and increase social assistance when conditions require it.
Dollar
After the sharp devaluation in mid-December, the authorities’ exchange rate policy will continue to support reserve accumulation objectives. Importantly, they have abandoned the opaque system of Administrative Import Controls (SIRA) and are addressing importers’ large over-indebtedness by offering foreign exchange instruments to importers who correctly record their trade debts. They moved to a more market-based regime and abandoned the previous approach of intervening in parallel futures and non-deliverable currency markets, while eliminating trading restrictions.
Foreign exchange market
The government is committed to continuing to eliminate multiple monetary practices and foreign exchange restrictions in the near term, while seeking to dismantle capital flow management measures as imbalances are addressed and conditions permit.
Reservations
These policies are expected to lead to a net reserve accumulation of $10 billion by the end of 2024, including $2.7 billion accumulated during the final weeks of 2023.
Monetary policy
The stance of monetary policy will evolve to support money demand and disinflation, while the monetary policy framework and operations will be adjusted to strengthen its anchoring role. Authorities have pledged to end central bank credit to the government and will continue to reduce the large peso surplus while gradually strengthening the central bank’s balance sheet.
No new financing
Under the fiscal plan, the government will not pursue any form of net market financing, but will instead focus on improving the maturity profile of domestic debt. Rebuilding relationships with international capital markets is also a top priority.
Structural reforms
Authorities are determined to address long-standing obstacles to growth and exports and boost Argentina’s vast energy and mineral potential, including by increasing competition and streamlining bureaucracy. Recent legislative initiatives represent an important step in this direction, for which political support is sought.
Source: Clarin
