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New IMF Agreement: Expedited Disbursements and Extra US $7.1 Billion

Dujovne and Lagarde held a press conference in the Argentine consulate in the US

By | [email protected] | September 26, 2018 7:17pm

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The government and the International Monetary Fund announced a new, revised stand-by agreement aimed at stabilizing the Argentine economy. In respective press conferences in the Argentine consulate in New York and the Treasury Ministry in Buenos Aires, Nicolás Dujovne and IMF Managing Director Christine Lagarde on one side, and new Central Bank (BCRA) Governor Guido Sandleris on the other, explained its most relevant aspects.

  • Argentina will receive an extra US $7.1 billion, meaning its entire credit line with the IMF will amount to US $57.1 billion.
  • The IMF accepted to expedite disbursements for an extra US$ 19 billion through 2019: the US $6 billion Argentina would receive until the end of 2018 will increase to 13.4, and the US $11.4 from 2019 will increase to 22.8 billion. “The combined effect of the fewer needs of financing for 2019 and 2020, plus the expedited disbursement and increase of funds provided by the IMF reduces and ensures the Treasury’s sovereign debt program.
  • The BCRA will establish a system whereby it will impose a “floor” and a “ceiling” to the exchange rate: AR $34 and $44 per US dollar, respectively. When the exchange rate nears one of the two, the BCRA will intervene in the market to keep it within those boundaries.
  • Inflation targets will be scraped and the main tool to tackle what Sandleris defined as his top priority will be monetary aggregates.

Even though Dujovne gave the press conference with Lagarde, the IMF’s Executive Board still has to give its final approval. Nonetheless, in a release published on the Fund’s website, Lagarde indicated that the “Fund remains fully committed to helping Argentina tackle the challenges it faces.”

“I support Argentina’s revised reform plan and believe it will be instrumental to restoring market confidence in the government’s ambitious economic agenda and to protecting the most vulnerable from the burden of the needed policy adjustment,” she added.