WASHINGTON (Reuters) – The International Monetary Fund said on Friday that it has reached a staff-level agreement with Argentina to unlock about $7.5 billion and complete the fifth and sixth reviews of the struggling country’s $44 billion loan program.
The agreement, which still needs IMF Executive Board approval, eases some program requirements because a devastating drought has created a “very challenging” economic environment in Argentina, causing some end-June financial targets to be missed.
Reuters first reported that the agreement would combine the fifth and sixth reviews of Argentina’s IMF program — a move that provides additional loan funds sooner. The IMF said its board would meet to consider the agreement in the second half of August.
The Fund said in a statement that since the fourth review of the loan program in March, Argentina’s economic situation has become very challenging due to the larger-than-anticipated impact of a drought, which had a significant impact on exports and fiscal revenues.”
“There have also been policy slippages and delays, which have contributed to strong domestic demand and a weaker trade balance,” the IMF added.
To sustain demand for Argentina’s peso currency, the agreement calls for authorities to ensure that policy interest rates remain “sufficiently positive in real terms.”
The agreement calls for a more gradual accumulation of reserves, with a target of around $1 billion by the end of 2023, compared with an $8 billion target in March.
The agreement calls for Argentina to tamp down import demand with new foreign exchange taxes for imported goods and to strengthen expenditure controls. But Argentina’s 2023 primary fiscal deficit target remains unchanged at 1.9% of GDP, the IMF said.
(Reporting by David Lawder)
