2023-07-28 18:31:04
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WASHINGTON (Reuters) – The International Monetary Fund said on Friday it reached an agreement with Argentina to unlock $7.5 billion and complete the fifth and sixth reviews of the $44 billion loan program. to the country.
The deal, 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 late-June financial targets to be missed.
Reuters first reported that the deal would combine the fifth and sixth reviews of Argentina’s IMF program — a move that provides additional funds for early borrowing. The IMF said its board would meet to consider the deal in the second half of August.
The Fund said in a statement that since the fourth review of the lending program in March, Argentina’s economic situation has become very challenging due to the larger-than-expected impact of a drought, which has had a significant effect on exports and tax revenues. .
“There were also policy slippages and delays (monetary and economic), which contributed to strong domestic demand and a weaker trade balance,” the IMF added.
To sustain demand for the currency, the agreement requires policymakers to ensure that interest rates remain “sufficiently positive in real terms”.
The agreement now provides for a more gradual accumulation of reserves, with a target of around US$1 billion by the end of 2023, compared to the US$8 billion target defined in March.
The deal requires Argentina to curb import demand with new exchange rates on imported goods and tighten spending controls. But Argentina’s 2023 primary fiscal deficit target remains unchanged at 1.9% of GDP, the IMF said.
(Reporting by David Lawder)
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