The International Monetary Fund staff reached an agreement with Bloomberg Argentina on the third review of its $44 billion program, even though the Washington lender warned against temporary currency policies.
The review is due to be sent to the IMF's executive board for approval, which is expected to meet this month, according to a statement from the IMF late Friday. After the review is completed, Argentina will have access to $6 billion, according to the International Monetary Fund.
The funds will help shore up the central bank's net cash reserves and refinance payments stemming from a previous program.
The International Monetary Fund said that prudent macroeconomic management and efforts to mobilize external funding are supporting macroeconomic stability in the country.
The trade balance is improving because of a healthy slowdown in domestic demand and imports, as the new economic team's actions are beginning to bear fruit, and inflation is moderate despite high levels, and the trade balance is improving as a result of a healthy slowdown in domestic demand and imports, according to the International Monetary Fund.
Key program objectives, including those related to the primary fiscal deficit and net international reserves, would remain the same during 2022 and 2023.
Argentina may need another waiver in this review after bringing back a temporary currency measure in late November that aimed to boost soy exports and shore up the central bank's dollar stockpile, but ran against IMF program conditions. A new exchange rate for soy farmers isn't allowed by the end of December, but it is in violation of the IMF's multiple currency practices rule.
The International Monetary Fund said in the statement that temporary administrative FX measures have been adopted as imbalances are being addressed, but they should be minimized because they are not a substitute for solid macroeconomic policy.
The program, which was signed in March, has faced a whirlwind of changes. Argentina is on its third economy minister this year, while two key IMF negotiators have stepped away from their positions for other positions. The key target on cash reserves has changed twice, while the government needed two waivers to pass the previous review for violating IMF program rules.
With board approval pending, the government only needs to meet one target on its primary fiscal deficit, instead of three targets, as a result of an IMF technicality that made the government just need to meet one target on its primary fiscal deficit instead of three targets like a normal review. The two other targets - net cash reserves and monetary financing - were already used as part of the previous review due to the date of the IMF board vote.
Argentina s IMF deal faces uncertainty next year with a presidential election that makes spending cuts politically costly to meet a deficit target. The last presidential election cycle has effectively suspended the IMF program for two years as government stalled negotiations on a new program.
While progress has been made, macroeconomic conditions remain fragile and a steadfast program implementation will be essential going forward, the IMF said, highlighting the need to reduce the primary fiscal deficit from 2.5% of GDP in 2022 to 1.9% of GDP in 2023.
The IMF said the program implementation will support a gradual reduction in annual inflation from around 95% by the end of 2022 to 60% by the end of 2023.
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