Documento FMI

IMF Country Report No.
18/219
ARGENTINA
REQUEST FOR STAND-BY ARRANGEMENT—PRESS
July 2018 RELEASE AND STAFF REPORT
In the context of the Request for Stand-By Arrangement, the following documents have
been released and are included in this package:
• A Press Release including a statement by the Chair of the Executive Board.
• The Staff Report prepared by a staff team of the IMF for the Executive Board’s
consideration on June 20, 2018, following discussions that ended on June 7, 2018, with
the officials of Argentina on economic developments and policies underpinning the
Stand-By Arrangement. Based on information available at the time of these
discussions, the staff report was completed on June 13, 2018.
• An Assessment of the Risks to the Fund and the Fund’s Liquidity Position.
• A Staff Supplement updating information on recent developments.
• A Staff Statement updating information on recent developments.
The documents listed below have been or will be separately released.
Letter of Intent sent to the IMF by the authorities of Argentina*

Memorandum of Economic and Financial Policies by the authorities of Argentina*
Technical Memorandum of Understanding*
*Also included in Staff Report
The IMF’s transparency policy allows for the deletion of market-sensitive information and
premature disclosure of the authorities’ policy intentions in published staff reports and
other documents.
Copies of this report are available to the public from
International Monetary Fund • Publication Services

PO Box 92780 • Washington, D.C. 20090
Telephone: (202) 623-7430 • Fax: (202) 623-7201
E-mail: [email protected] Web: http://www.imf.org
Price: $18.00 per printed copy
International Monetary Fund

Washington, D.C.
© 2018 International Monetary Fund

Press Release No. 18/245
700 19th Street, NW
FOR IMMEDIATE RELEASE
Washington, D. C. 20431 USA
June 20, 2018
IMF Executive Board Approves US$50 Billion Stand-By Arrangement for Argentina
The Executive Board of the International Monetary Fund (IMF) today approved a three-year
Stand-By Arrangement (SBA) for Argentina amounting to US$50 billion (equivalent to SDR
35.379 billion, or about 1,110 percent of Argentina’s quota in the IMF).
The Board’s decision allows the authorities to make an immediate purchase of US$15 billion
(equivalent to SDR 10,614 billion, or 333 percent of Argentina’s quota). One half of this amount
(US$7.5 billion) will be used for budget support. The remaining amount of IMF financial support
(US$35 billion) will be made available over the duration of the arrangement, subject to quarterly
reviews by the Executive Board. The authorities have indicated that they intend to draw on the
first tranche of the arrangement but subsequently treat the remainder of the arrangement as
precautionary.
The Argentine authorities’ economic plan backed by the SBA aims to strengthen the country’s
economy by restoring market confidence via a consistent macroeconomic program that lessens
financing needs, puts Argentina’s public debt on a firm downward trajectory, and strengthens the
plan to reduce inflation by setting more realistic inflation targets and reinforcing the
independence of the central bank. Importantly, the plan includes steps to protect society’s most
vulnerable by maintaining social spending and, if social conditions were to deteriorate, by
providing room for greater spending on Argentina’s social safety net.
Following the Executive Board discussion of Argentina’s economic plan, Ms. Christine Lagarde,
Managing Director and Chair, summarized the Board’s findings:
“For the past 2½ years, Argentina has been engaged in a systemic transformation of its economy,
including deep changes to foreign exchange markets, subsidies, and taxation, as well as
improvements to their official statistics. Nonetheless, a recent shift in market sentiment and an
ill-fated confluence of factors have placed Argentina under significant balance of payments
pressures. Amid these challenging circumstances, the Government has requested IMF support in
implementing its own policy plans.
“The authorities’ intended policies seek to address longstanding vulnerabilities, ensure that debt
remains sustainable, reduce inflation, and foster growth and job creation, while reducing poverty.
“Given the large fiscal deficits over the past several years, the Government’s economic program
is anchored on the goal of achieving federal government primary balance by 2020. This will be
key to restoring market confidence. Improving the budgetary process and providing this
medium-term anchor for fiscal policy will help to entrench these gains.
“The authorities also aim to rebuild the credibility of the inflation targeting framework, including
by strengthening central bank independence and ending direct and indirect central bank financing
of the government. These efforts are expected to bring inflation to single digits by end-2021.
“The authorities are committed to a floating, market-determined exchange rate. They intend to
limit foreign exchange intervention to periods of significant volatility and market dysfunction,
and to rebuild reserve buffers.
“The program places considerable emphasis on maintaining social cohesion, encouraging gender
equality, and protecting society’s most vulnerable. The authorities, at the highest level, are
strongly committed to these principles. The most vulnerable population will be assisted by well-
designed government support programs that will be prioritized within the program targets. The
Government has also prioritized gender equity to realize the potential and benefits from
Argentine women fully participating, on equal footing, in the economy.
“The Argentine Government has demonstrated its strong ownership of the program, which is
custom-tailored for the situation faced by the people of Argentina. There are evident risks to the
program but steadfast implementation of the policy plans will allow the country to fully
capitalize on its economic potential, and to ensure that all Argentines are included in the
country’s future prosperity.”
ANNEX
Recent economic developments
Argentina’s financial markets came under sudden pressure in April as the result of a confluence
of factors. A severe drought led to a sharp decline in agricultural production and export revenue,
world energy prices increased, and global financial conditions tightened through an appreciation
of the U.S. dollar and an upward shift in U.S. interest rates. These changes interacted with
vulnerabilities that Argentina’s policy path had embedded, including significant fiscal and
external financing requirements. These economic forces manifested themselves principally in the
form of pressure on the Argentine peso, market anxiety about the roll-over of short-term central
bank paper, and an increase in Argentina’s sovereign risk premium.
Program summary
The IMF-support economic plan aims to strengthen the Argentine economy by focusing on four
key pillars:
• Restore market confidence. The government has committed to a clear macroeconomic

program that lessens federal financing needs and puts public debt on a firm downward trajectory.
This will help create a clear path to strong, sustained, and equitable growth and robust job
creation. Anchoring this effort is a fiscal adjustment that ensures that the federal government
reaches primary balance by 2020, with a significant up-front adjustment to secure a primary
deficit of 1.3 percent of GDP in 2019.
• Protect society’s most vulnerable. Steps will be taken to strengthen the social safety net,
including through a redesign of assistance programs (which are often overlapping, yet still result
in gaps in coverage) and through measures to increase female labor force participation (by
eliminating the second-earner tax penalty and providing working families with assistance with
childcare). The level of social spending will be protected under the program. Also, if needed,
additional spending on pre-identified, high-quality, means-tested social assistance projects will
be accommodated. The authorities’ goal is to continue to reduce poverty rates throughout the
course of the arrangement even if there were to be a slower-than-expected economic rebound.
• Strengthen the credibility of the central bank’s inflation targeting framework. The
government has pledged to provide the central bank with the institutional and operational
independence and autonomy that is needed to achieve effectively inflation objectives. In
addition, the central bank has adopted a new credible path of disinflation to bring inflation to
single digits by the end of the three-year SBA period. Plans are also being developed to ensure
the central bank has a healthy balance sheet and full financial autonomy. The plan also foresees
steps to diminish the Central Bank’s vulnerability from a short term peso denominated debt
(LEBACs).
• Progressively lessen the strains on the balance of payments. This would involve
rebuilding international reserves and reducing Argentina’s vulnerability to pressures on the
capital account.
Table 1. Argentina: Selected Economic and Financial Indicators
Proj.
2015 2016 2017 2018 2019 2020 2021 2022 2023
(Annual percentage changes unless otherwise indicated)

National income, prices, and labor
markets
GDP at constant prices 2.7 -1.8 2.9 0.4 1.5 2.5 3.1 3.1 3.2
Domestic demand 4.2 -1.3 6.3 -1.4 0.5 2.0 2.7 2.8 3.0
Consumption 4.2 -0.8 3.3 -0.9 1.6 1.9 1.9 1.6 1.7
Private 3.7 -1.0 3.6 -0.6 2.3 2.5 2.4 1.9 2.0
Public 6.9 0.3 2.0 -2.2 -2.0 -1.6 -0.9 -0.4 -0.3
Investment 3.5 -4.9 11.3 -1.2 -2.1 3.0 6.8 8.3 8.3
Private 4.4 -5.3 11.0 1.9 2.5 4.0 7.1 8.0 6.8
Public 3.9 -4.7 13.5 -12.0 -19.1 -1.6 5.3 9.8 15.9
Exports -2.8 5.3 0.4 5.6 6.8 5.4 5.6 5.8 5.5
Imports 4.7 5.7 14.7 -2.7 1.6 3.1 3.8 4.1 4.2
Change in inventories and stat. disc. 0.2 0.2 1.6 -0.5 -0.5 0.0 0.0 0.0 0.0
Nominal GDP (bn Argentine pesos) 5,955 8,189 10,558 13,240 16,068 18,746 21,227 23,191 25,135
Output gap (percent) 1.1 -1.8 -1.5 -2.9 -3.7 -3.3 -2.5 -1.8 -1.3
CPI inflation (eop, y/y % change) … … 24.8 27.0 17.0 13.0 9.0 5.0 5.0
GDP deflator (y/y % change) 26.6 40.1 25.3 24.9 19.6 13.8 9.9 5.9 5.1
Unemployment rate (%) … 8.5 8.4 8.5 8.6 8.4 8.2 8.0 7.8
(Percent of GDP unless otherwise indicated)

External sector
Exports f.o.b. (goods, bn US$) 56.8 57.9 58.4 66.4 71.6 75.3 80.1 84.9 89.6
Imports f.o.b. (goods, bn US$) 57.6 53.5 64.0 65.7 67.7 72.2 77.4 82.1 86.8
Trade balance (goods bn US$) -0.8 4.4 -5.5 0.7 4.0 3.1 2.7 2.8 2.8
Trade balance (goods) -0.1 0.8 -0.9 0.1 0.7 0.5 0.4 0.4 0.4
Terms of trade (% change) -4.4 6.0 -2.7 4.0 -1.9 -3.0 -1.4 -0.3 -0.1
Total external debt 27.9 34.2 37.0 51.3 52.6 52.0 50.8 50.0 49.2
Savings-Investment balance
Gross domestic investment 15.6 14.6 14.8 15.1 14.8 14.9 15.5 16.4 17.2
Private 11.9 11.2 11.3 12.1 12.2 12.4 12.9 13.6 14.1
Public 3.6 3.4 3.5 3.1 2.6 2.5 2.6 2.7 3.1
Gross national savings 12.8 12.0 10.0 11.6 11.6 12.2 13.3 14.3 15.1
Private 15.0 14.9 12.9 13.7 12.8 12.6 13.4 14.1 14.4
Public -2.1 -2.9 -3.0 -2.1 -1.2 -0.4 -0.1 0.1 0.7
Current account balance -2.7 -2.7 -4.8 -3.6 -3.2 -2.7 -2.2 -2.1 -2.1
Public sector 1/
Primary balance -4.4 -4.7 -4.2 -2.8 -1.3 0.2 0.8 1.2 1.3
of which: Federal government -3.8 -4.2 -3.8 -2.7 -1.3 0.0 0.5 0.9 1.2
memo: Structural federal primary
balance 2/ -4.2 -4.5 -3.7 -2.1 -0.6 0.6 0.9 1.2 1.4
Overall balance -5.8 -6.4 -6.5 -5.1 -3.8 -2.9 -2.7 -2.6 -2.4
of which: Federal government -5.1 -5.8 -6.0 -5.0 -3.7 -3.0 -2.9 -2.7 -2.3
Revenues 35.4 35.1 34.8 35.0 35.6 35.8 35.8 35.5 35.2
Primary expenditure 3/ 39.8 39.8 39.0 37.8 36.9 35.6 34.9 34.3 34.0
Total public debt (federal) 55.1 53.3 57.1 64.5 60.9 57.4 55.8 54.1 53.0
Money and credit

Monetary base (eop, y/y % change) 34.9 31.7 21.8 25.9 21.3 18.0 14.5 14.2 13.8
M2 (% change) 28.2 30.4 25.8 22.5 25.3 18.6 14.5 14.2 13.8
Credit to the private sector (eop, y/y
% change) 35.7 31.2 51.3 34.9 21.9 18.0 23.8 16.9 16.2
Credit to the private sector real (eop,
y/y % change) … … 21.2 6.2 4.2 4.4 13.6 11.3 10.6
Interest rate (eop) 4/ 32.2 23.9 28.8 37.2 22.5 15.8 11.0 10.0 9.7
Real interest rate (eop), 12-m ahead
y/y inflation 4/ … … 9.7 17.2 8.4 6.2 5.7 4.8 4.5
Real interest rate (eop), 1-m ahead
m/m inflation 4/ … … 7.4 14.2 6.6 4.5 4.5 4.7 4.4
Memorandum items
Gross international reserves (bn US$) 25.6 39.3 55.1 65.4 69.0 79.7 88.4 96.0 103.8
Net international reserves, (bn US$)
5/ -1.5 10.3 27.9 29.7 33.4 44.0 54.6 69.8 83.2
Change in REER (eop, % change) 5.3 -3.4 5.4 -18.1 3.9 0.7 0.1 0.0 0.0
Sources: Ministerio de Hacienda y Finanzas Públicas, Banco Central de la República Argentina (BCRA), and
Fund staff estimates.
1/ The primary balance excludes profit transfers from the central bank of Argentina. Interest expenditure is net of
property income from the social security fund before 2016.
2/ Percent of potential GDP.
3/ Includes transfers to municipalities, but excludes municipal spending.
4/ Average of all LEBAC maturities before 2017 and midpoint of the repo corridor starting in 2017; ex ante real
rates.
5/ Assumes that entire first tranche would remain deposited at the BCRA. Projections and program
targets will be adjusted accordingly upon changes.
ARGENTINA
REQUEST FOR STAND-BY ARRANGEMENT
June 13, 2018
EXECUTIVE SUMMARY
Context. Despite a difficult economic context, President Macri’s administration, over the
past two and a half years, has taken bold steps to eliminate a wide range of distortions
in the economy. Efforts were also made to strengthen institutions (including the
complete reconstruction of the statistics agency, in an effort to restore credibility to
Argentine data), as well as an assertive effort to tackle corruption. Despite these efforts,
a gradual approach to fiscal consolidation, combined with a tightening of global
financial conditions, a poor harvest, and the introduction of a tax on nonresident
holdings of short-term central bank paper, generated significant anxiety among market
participants. Starting in mid-April, Argentina came under abrupt balance of payments
pressures as both domestic and foreign investors decided to liquidate their position in
onshore peso assets. To stem the outflows, the authorities significantly increased short-
term interest rates, tightened fiscal policy, and sold foreign exchange. Shortly after
taking these steps the government announced its intention to approach the IMF for an
exceptional access Stand-By Arrangement. The government subsequently developed a
credible and ambitious policy plan to:
 Restore market confidence. The government has committed to a clear

macroeconomic program that lessens the federal financing needs and puts public
debt on a firm downward trajectory. This will help create a clear path to strong,
sustained, and equitable growth and robust job creation. Anchoring this effort is a
fiscal adjustment that ensures that the federal government reaches primary balance
by 2020, with a significant upfront adjustment to secure a primary deficit of
1.3 percent of GDP in 2019.
 Protect society’s most vulnerable. Steps will be taken to strengthen the social
safety net, including through a redesign of assistance programs (which are often
overlapping, yet still result in gaps in coverage) and through measures to increase
women labor force participation (by eliminating the second-earner tax penalty and
providing working families with better childcare infrastructure). The level of social
spending will be protected under the program. Also, if needed, additional spending
on pre-identified, high-quality, means-tested social assistance projects will be
accommodated. The authorities’ goal is to continue to reduce poverty rates
ARGENTINA
throughout the course of the arrangement even if there were to be a slower-than-

expected economic rebound.
 Strengthen the credibility of the central bank’s inflation targeting framework.

The government has indicated it will provide the central bank the institutional and
operational independence and autonomy that is needed to achieve this objective. In
addition, the central bank has adopted a new, credible path of disinflation to bring
inflation to single digits by end-2021. Plans are also being developed to ensure the
central bank has a healthy balance sheet and full financial autonomy.
 Progressively lessen the strains on the balance of payments. This would involve
rebuilding international reserves and reducing Argentina’s vulnerability to pressures
on the capital account.
Program modalities. In pursuit of their policy plan, the Argentine authorities have
requested support from a 36-month Stand-By Arrangement in an amount equivalent to
SDR 35,379 million (1,110 percent of quota). The phasing would be front-loaded. Thirty
percent of the access (333 percent of quota or SDR 10,613.71 million) would be made
available upon approval of the arrangement (with equal phasing thereafter). The
authorities intend to draw the first tranche and would use one-half of the domestic
counterpart of Fund resources (SDR 5,306.855 million) for budgetary purposes. They
intend to treat the remainder of the arrangement as precautionary. Such an indication of
intent does not, however, affect the legal character of the arrangement. Presuming all
conditions in the arrangement are met, the member can still present that it faces an
actual balance of payments need and request a purchase under the Stand-By
Arrangement.
2 INTERNATIONAL MONETARY FUND

ARGENTINA
Approved By: A mission team undertook discussions in Washington, D.C. from

Nigel Chalk (WHD) and May 18 to June 7, 2018. The team consisted of R. Cardarelli (head),
Daria Zakharova (SPR) J. Canales-Kriljenko, Y. Carrière-Swallow, L. Lusinyan, and J. Wong (all
WHD), P. Dudine (FAD), R. Garcia-Verdu and J. Menkulasi (SPR), and
R. Veyrune (MCM). The mission was aided by A. Aghababyan, A. Diaz,
and J. Sarmiento Monroy. Mr. Lopetegui (Alternate Executive Director)
participated in most meetings.
CONTENTS
ECONOMIC AND POLITICAL CONTEXT __________________________________________________________ 5
MARKET VOLATILITY _____________________________________________________________________________ 6
A MORE ACCELERATED FISCAL PATH _________________________________________________________ 10
PROTECTIONS FOR THE MOST VULNERABLE _________________________________________________ 13
SUPPORTING GENDER EQUITY ________________________________________________________________ 15
MONETARY FRAMEWORK UNDERPINNING THE PROGRAM ________________________________ 16
THE BANKING SYSTEM _________________________________________________________________________ 19
MACROECONOMIC FRAMEWORK AND RISKS ________________________________________________ 20
AN ADVERSE SCENARIO _______________________________________________________________________ 23
PROGRAM MODALITIES ________________________________________________________________________ 27
EXCEPTIONAL ACCESS CRITERIA ______________________________________________________________ 31
STAFF APPRAISAL ______________________________________________________________________________ 33
BOX
1. Argentina and Selected FCL/PLL Countries: Comparing Adverse Scenarios ___________________ 26
TABLES
1. Priority Social Protection Programs____________________________________________________________ 14
2. Macroeconomic Outlook: Baseline and Adverse Scenarios ____________________________________ 25
3. Selected Economic and Financial Indicators ___________________________________________________ 35
INTERNATIONAL MONETARY FUND 3

ARGENTINA
4. Summary Balance of Payments, 2014–23 ______________________________________________________ 36

5. Consolidated Public Sector Operations, 2011–23 _____________________________________________ 37
6. Federal Government Operations, 2015–23 ____________________________________________________ 38
7. Summary Operations of the Financial System, 2015–23 _______________________________________ 39
8. External Debt, 2011–23 ________________________________________________________________________ 40
9. Public Debt, 2011–23 __________________________________________________________________________ 40
10. Federal Government Gross Financing Needs and Sources ___________________________________ 41
11. External Gross Financing Needs and Sources ________________________________________________ 42
12. Evolution of the BCRA’s Balance Sheet _______________________________________________________ 43
13. Schedule of Reviews and Purchases __________________________________________________________ 44
14. Quantitative Performance Criteria, Indicative Targets, and Consultation Clauses ___________ 45
15. Structural Program Conditionality ____________________________________________________________ 46
16. Indicators of Fund Credit, 2018–26—Baseline Scenario ______________________________________ 47
17. Indicators of Fund Credit, 2018–26—Adverse Scenario ______________________________________ 48
18. External Debt Sustainability Framework, 2013–23 ____________________________________________ 49
ANNEX
I. Public Debt Sustainability Analysis _____________________________________________________________ 51
APPENDIX
I. Letter of Intent _________________________________________________________________________ 64
I. Attachment I: Memorandum of Economic and Financial Policies ______________________ 66
II. Attachment II: Technical Memorandum of Understanding ____________________________ 84

ARGENTINA
ECONOMIC AND POLITICAL CONTEXT

1. President Macri took office in December 2015 at the helm of a country facing
pervasive macroeconomic imbalances, microeconomic distortions, and a debilitated
institutional framework. At the macro level, large fiscal deficits, predominantly financed by
financial repression and money creation, had created an unstable economy where inflation
was very high, investment was at historically low levels, and international reserves were
virtually depleted. At the same time, an elaborate system of microeconomic distortions was
in place, including: administrative controls on prices; large and regressive energy and
transportation subsidies; a plethora of trade restrictions; the rationing of foreign exchange
(FX); an uncompetitive business environment; the provision of inaccurate official statistics;
and corruption. Despite a plethora of social transfers and government interventions into the
economy, when President Macri took office, one in three Argentines were living below the
official poverty line.
2. Argentina has been engaged in a systemic transformation of its economy. The new
government moved assertively on multiple fronts: unifying the exchange rate and allowing
the level of the currency to be determined by market forces; putting in place an inflation
targeting framework for monetary policy; eliminating FX controls; settling the outstanding FX
forward contracts and rebuilding international reserves; beginning the difficult process of
realigning utility prices and eliminating inefficient electricity and fossil fuel subsidies; cutting
government spending and reducing the most distortive taxes; and reaching a debt exchange
agreement with foreign creditors to reopen international capital markets. Finally, with IMF
assistance, the government restored credibility to official statistics through a top-to-bottom
rebuild of the statistics agency. All of this was achieved with the government holding a
minority of the seats in Congress.
3. Not surprisingly, the unwinding of these distortions led to a recession in the first
year of the administration. However, the economy recovered in 2017, with strong
investment and consumption alongside an acceleration in job creation, and the government’s
coalition was able to win Senate races in the five largest population centers in October 2017.
Nonetheless, the governing coalition remains a minority party in both houses of Congress.
Finally, in November 2017, the government signed a “fiscal pact” with the provinces that
settles past provincial claims on the federal government, increases revenue sharing, and
finances the pension deficits of certain provinces. In return, the provinces agreed to eliminate
certain distortionary taxes and to keep their growth in nominal spending below the rate of
inflation.
4. To maintain social consensus the government undertook many of these policy

steps—most notably the fiscal adjustment—at a gradual pace. Largely as a by-product of
this understandable preference for gradualism, the country was left vulnerable on a number
of fronts (these vulnerabilities were highlighted in the 2017 Article IV Consultation):

ARGENTINA
 With most of the reductions in energy subsidies offset by lower taxes, greater automatic
transfers to provinces, and higher spending on pensions, the primary deficit remained
broadly unchanged as a share of GDP through 2016 and 2017. Interest spending, however,
increased rapidly, as financing from money creation and financial repression was replaced
with public debt, much of it in foreign currency. As of March 2018, about 70 percent of the
federal debt stock was denominated in U.S. dollars or other foreign currencies and, since
January 2016, the federal government has issued US$56 billion in external debt (with a
further US$13 billion issued by provinces). As a result, the overall fiscal deficit and gross fiscal
financing needs of the federal budget increased markedly.
 In parallel, the current account deficit (as a percent of GDP) tripled between 2014 and 2017
as FX controls were released and import compression was reversed. Sizable capital inflows—
much of it used to finance the general government—allowed the central bank (BCRA) to
rebuild reserves (from US$25.6 billion in gross reserves at end-2015 to about US$55 billion at
end-2017; net of short-term external liabilities, reserves rose from −US$1.5 million to almost
US$28 billion over the same period). Nonetheless, the higher current account deficit and
debt amortization led to a dramatic increase in gross external financing needs (projected to
reach about US$94 billion for the remainder of 2018).
 Second-round effects from the normalization of utility tariffs, an insufficient countervailing

force from fiscal retrenchment, continued strong nominal wage growth, and some backward
indexation of contracts have resulted in significant inflation inertia. This has disrupted the
central bank’s planned path of disinflation.
 The peso became increasingly overvalued as the pace of disinflation was slower-than-
planned and strong capital inflows (much of it to finance the general government budget)
put upward pressure on the nominal exchange rate. The 2017 Article IV Consultation Staff
Report judged the peso to have been 10–25 percent overvalued relative to medium-term
fundamentals and desirable policies.
MARKET VOLATILITY
5. It is against this backdrop of known vulnerabilities that Argentina began to come
under significant capital account pressures. The proximate causes of this shift in market
sentiment was an ill-fated confluence of factors including:
 On December 28, 2017, the government took the decision to reset its inflation targets,
raising the midpoint of the 2018 target from a 10±2 percent band to a point estimate of
15 percent. Then, at the following monetary policy meeting, on January 9, 2018, the central
bank lowered its policy rate by 75 basis points (bps), and by another 75 bps on January 23.
The combined effect led inflation expectations to quickly rise to 22 percent for end-2018
(i.e. by more than the increase in the target), triggering a rapid depreciation of the peso (by
about 15 percent from December to February) and calling into doubt both the BCRA’s
independence and its commitment to lower inflation. The path for disinflation was further

ARGENTINA
disrupted by utility price increases in the first half of 2018, causing inflation to stall at around
25 percent over the last several months.
 Global financial conditions tightened. The U.S. dollar strengthened and the U.S. treasury
yield curve shifted upwards as markets priced in a faster pace of monetary normalization by
the Federal Reserve. This resulted in a reduced appetite for Argentine international bonds,
particularly after the federal government placed US$9 billion in debt on January 4 (at
historically low yields). Subnational governments have, so far, not issued external debt in
2018.
 A domestic drought is expected to

significantly erode agricultural export Soy Production
(Millions of tons)
revenue. Hot and dry conditions during much 70
of November–March lead to large reductions 60
50
in crop yields, particularly for soy and corn. 40
Later, heavy rains led to waterlogged fields 30
20
and hampered efforts to harvest the crop. 10
Estimates suggest that the crop will be 20–30 0
percent lower than in the previous harvest
2018 *
2000
2002
2004
2006
2008
2010
2012
2014
2016
likely making this one of the worst droughts Source: Argentine Ministry of Agroindustry.
in recent decades.
 Investing in short-term BCRA paper became a crowded carry trade among foreign asset
managers, offering high returns insofar as the exchange rate remained relatively stable.1
However, the steady depreciation of the peso versus the U.S. dollar in the first quarter of
2018 ate into investor returns. By early April, both residents and nonresidents were looking to
exit their positions, and the latter were fueled by the expected introduction of a 5 percent
withholding tax on interest earned on central bank bills (the measure passed the Congress in
December 2017 but was to become effective on April 26). In April, the central bank facilitated
this exit out of peso assets by selling US$4.7 billion dollars into the market, effectively setting
up a one-way bet for investors. As the run on short-term peso liabilities accelerated, the
government faced increasing strains. The situation came to a head on April 25 when the
central bank sold US$1.5 billion on that one day alone.
1
A significant stock of LEBACs, out of the total 10 percent of GDP currently, needs to be rolled over every 35
days. More than half of the outstanding amount is held by non-bank investors, which hampers the BCRA’s
capacity to control peso liquidity via the reserve requirement.

ARGENTINA
LEBAC Yield Curve, 2018 Interest Rates

(Percent)
(Percent, ARS‐denominated bonds)
60 50
8-Jun 28-Mar 15-May Monetary policy rate
45
50 1-month LEBAC
40
40 35
30
30
25
20 20
1/2/18
5/8/18
6/5/18
1/16/18
1/30/18
2/13/18
2/27/18
3/13/18
3/27/18
4/10/18
4/24/18
5/22/18
1 2 3 4 5
Maturity (months)
Source: BCRA and Bloomberg. Source: BCRA and Bloomberg.
6. What had started as a portfolio rotation out of short-term peso liabilities of the
central bank soon became a more generalized run on Argentine assets. The central bank
responded to these pressures by raising interest rates by 300 bps on April 27, accompanied
by substantial sales of international reserves amidst disorderly market conditions. This was
insufficient to relieve pressures on the peso. On May 3, the central bank raised rates a further
300 bps. What was intended as a mechanism to stabilize markets, however, became a source
of panic, and investors rushed to offload peso assets. On May 4, the government announced
a package of measures to restore investor confidence that included:
 A further increase in the policy rate by 675 bps (a cumulative increase of 1,275 bps over the
space of one week, bringing the mid-point 7-day repo rate from 27¼ percent to 40 percent).
 A widening of the corridor around the policy rate.
 A reduction in the ceiling on domestic banks’ net FX long positions from 30 to 10 percent of
their net equity or liquidity.
 A decrease in the 2018 federal government primary deficit target from 3.2 to 2.7 percent of
GDP, largely achieved through cuts to capital spending and a real cut in public sector wages.
There was no change, however, to the 2019 target (of 2.2 percent of GDP). The government
indicated that the reduction in the 2018 primary deficit would lower financing needs by
US$3 billion. However, the announcement did not take account of the higher gross fiscal
financing needs arising from an increase in the interest bill—due to the higher interest rates
and a more depreciated peso. This partly undermined the government’s communication
strategy.

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7. On May 8, amid continued volatility Exchange Rate

(ARS / USD)
and pressure in FX markets, President 26
Macri announced that discussions would
24
begin on a high access arrangement with
22
the IMF. On May 11, the currency
depreciated a further 2.7 percent, the central 20
bank sold US$1.2 billion, and interest rates 18

on 35-day maturity central bank paper rose
1/1/18
4/9/18
5/7/18
6/4/18
1/15/18
1/29/18
2/12/18
2/26/18
3/12/18
3/26/18
4/23/18
5/21/18
to 49 percent. On May 14, the peso lost a
further 7 percent. While the private sector Source: Bloomberg.
accumulation of external assets has

accelerated, dollar deposits have remained stable, and there is no evidence of a run on the
banking system. The depreciation and higher interest rates are also affecting perceptions of
sovereign risk, with average spreads on foreign currency bonds having risen by around
120 bps from mid-April until mid-May (larger increases have been seen on shorter-maturity
U.S. dollar bonds). Fitch also decided to lower Argentina’s rating outlook from positive to
stable in the wake of this volatility.
8. On May 16, the government successfully rolled over US$28 billion in maturing
short-term BCRA paper (at a 40 percent annual rate on one-month paper), and
pressures on the currency moderated. With the central bank offering up to US$5 billion in
foreign exchange at 25 pesos to the U.S. dollar, and with anticipation of an agreement with
the Fund increasingly discussed in the local media, pressure on the currency waned and
financial markets in Argentina calmed. The exchange rate was stable at around AR$25 per
U.S. dollar, the central bank did not undertake spot intervention in the currency market, and
interest rates remained high (with one-month central bank liabilities yielding close to 40
percent). Following the announcement of a staff-level agreement with the Fund on June 7,
the BCRA removed its FX offer of US$5 billion at an exchange rate of AR$25 per U.S. dollar. In
the following two days the exchange rate depreciated by 5 percent and, in June 12, the BCRA
sold around US$700 million in spot markets and US$300 million in non-deliverable futures.
9. Following the announcement of staff-level agreement on an exceptional access

Stand-By Arrangement on June 7, there are tentative signs of a return of market
confidence. Upon news of the announcement, sovereign spreads fell and bond prices
appreciated by around 3 percent. The EMBI spread fell from 479 bps to 474 bps while one-
year CDS spreads fell by 10 bps (to 178 bps). The stock market index rose by 4 percent.

ARGENTINA
Argentina Sovereign Curve, 2018 Argentina Sovereign Curve, 2018

(Percent, ARS-denominated bonds) (Percent, USD-denominated bonds)
40 10
8-Jun 30-Mar
8-Jun 30-Mar
35
15-May 8 15-May
30
6
25
20 4
15
2
1 2 3 4 5 6 7 8 9 10
1 2 3 4 5 6 7 8 9 10
Maturity (years)
Maturity (years)
Source: Bloomberg.
Source: Bloomberg.
A MORE ACCELERATED FISCAL PATH

10. The authorities’ adjustment program is anchored on the goal of achieving federal
government primary balance by 2020. The fiscal effort will be front-loaded with a targeted
primary deficit of 2.7 percent of GDP in 2018 and 1.3 percent of GDP in 2019. This represents
a bold and ambitious commitment, especially coming from the 3.8 percent of GDP primary
deficit outturn of 2017. Such a fiscal path would put the debt-to-GDP ratio on a steady,
downward trajectory throughout the duration of the program (falling from about 65 percent
of GDP at end-2018 to below 56 percent of GDP by end-2021). On June 7, the Treasury
announced their commitment to these new federal government primary balance targets.
Staff considers that the completion by the authorities of this action meets the test (i.e., that
the upfront implementation of the measure is critical for the success of the program) for a
prior action.
11. The program includes a quarterly performance criterion on the primary deficit of
the federal government. To aim to ensure that convergence to a balanced budget is
matched at the provincial level, an indicative target will be set on the primary balance of the
general government. Submission to Congress of a 2019 budget that is consistent with the
program will be an end-October 2018 structural benchmark.
12. This realignment of the fiscal position will be underpinned by measures already
underway for 2018 and a commitment to implement further steps in the context of the
2019 budget. These include:
 Delaying implementation of parts of the recently-passed tax reform to 2020 as a means to

preserve revenues (i.e., the reduction in employers’ social security contributions and the
ability to deduce the financial transaction tax from income taxes).
 Maintaining the average export tax rate on soy products at 25.5 percent.
 Further reducing inefficient subsidies for energy and transportation.

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 Rationalizing spending in other goods and services, with a 15 percent cut in real terms in
2018 and continuing in 2019.
 Reducing the wage bill by reducing public employment through sustained attrition of non-
priority employees in 2018 and a hiring freeze in the federal administration (excluding
universities) for 2019 and 2020.
 Capping the nominal growth of public sector wages (including non-wage benefits and
payments) to an average of 8 percent during June 2018–June 2019. An agreement with the
unions to this effect has already been signed.
 Cutting transfers to state-owned enterprises by a total of 15 percent by 2019, combined with

efforts to strengthen their financial position.
 Reducing discretionary transfers to provinces by 1.2 percent of GDP by 2019 and ensuring
those reductions are offset by cuts in provincial spending on wages and goods and services.
The resulting reduction in the federal deficit will, therefore, be reinforced at the subnational
level. The identified reductions in provincial spending are designed to preserve social
assistance and other poverty alleviation programs that are executed at the provincial level.
 Reducing capital spending by 0.6 percent of GDP by 2019 with the expectation that private-
public partnership projects would protect the overall level of outlays on public infrastructure.
 Scaling back tax expenditures linked to the corporate income tax.
 Selling land and amortizing pension fund assets that are currently held by the government to
partially finance the government’s payment of past pension claims.2
The government also intends to continue working within the appropriate parliamentary
commission toward defining a path to improve the pension system and make it financially
sustainable and fairer, for both current and future generations.
13. The government recognizes the uncertainties in the outlook and, in the interests of
fiscal prudence, has identified a further 0.2 percent of GDP in contingent measures.
These are largely related to reductions in capital spending and would be drawn upon in the
event that GDP growth was weaker-than-expected or some other event were to put at risk
the achievement of the primary deficit target of 2.7 percent of GDP in 2018. On the other
hand, if economic and fiscal outturns evolve in a more positive direction, the authorities
would consider a more front-loaded elimination of distortive taxes in order to better support
growth and investment (in line with the pace that was outlined in the tax reform that was
2
The accounting treatment of these past pension claims and the amortization of the corresponding pension fund
assets would be examined in detail by technical specialists in FAD and STA to ensure the fiscal accounts fully
correspond to guidance in the Government Finance Statistics Manual.

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adopted in late 2017). The fiscal position and implications for policy measures would be
assessed at the time of each program review.
Summary of Identified Fiscal Measures

(Cumulative relative to 2017, in percent of GDP)
2018 2019
Delayed implementation of tax reform 0.0 0.3

Export tax on soy products 0.0 0.1
Reductions in inefficient energy and transportation subsidies 0.3 0.7
Savings on goods and services spending 0.1 0.2
Real wage and employment reduction for public employees 0.2 0.3
Cutting transfers to state owned enterprises 0.1 0.1
Reductions in discretionary capital and current transfers to provinces 0.5 1.2
Reductions in capital spending of the federal government 0.3 0.6
Scale back tax expenditures linked to the corporate income tax 0.0 0.1
Sale of land and amortization of pension fund assets 0.2 0.6
Total 1.7 4.2
Source: Fund staff calculations.
14. The broader budgetary framework will also be strengthened.
 The annual budget will be complemented with simple and transparent medium-term
objectives for the primary balance, cast in a Medium-Term Fiscal Framework (MTFF) that
shows the path of expenditure and revenue consistent with these objectives. The annual
budget documents will transparently indicate the impact of new measures that will be
undertaken to achieve those primary balance objectives (a structural benchmark for end-
October 2018).
 A new mid-year fiscal report will be published by June 2019 that contains updated estimates
of fiscal outturns and a revised MTFF, with new macroeconomic and fiscal projections for the
medium term.
 Adequate resources and staffing will be provided to the newly created CBO (Oficina de
Presupuesto del Congreso), so that it can effectively (i) evaluate budgetary and
macroeconomic forecasts (including those contained in the annual budget and mid-year
budget report); (ii) provide independent costing to Congress of new policy initiatives; and
(iii) assess the government’s fiscal plans, including the annual budget (a structural benchmark

ARGENTINA
for end-December 2018). There would also be a comprehensive examination of the CBO’s
design features to ensure that it is fully able to achieve the government’s desired objectives.
 Adequate resources will also be provided to the Federal Council of Fiscal Responsibility
(FCFR) so that it can effectively fulfill its mandate of monitoring and evaluating fiscal
performances of Federal and provincial governments, including compliance with the Fiscal
Responsibility Law. There would also be a comprehensive examination of the FCFR’s design
features to ensure that it is fully able to achieve the government’s desired objectives.
 The Budget documents will continue showing a statement quantifying the size and type of
tax expenditures.
 A fiscal risk analysis framework will be developed with a view to be included in the 2020
budget documents. This would include the publication of a fiscal risks scenario analysis, a
long-term fiscal sustainability analysis (undertaken for the federal and general government),
and an analysis of contingent liabilities (explicit and implicit) including those related to the
financing of PPP projects, state enterprises, and unfunded pension obligations of the federal
government.
 Revenue administration will be strengthened through (i) developing a comprehensive

taxpayer compliance program with AFIP; (ii) modernizing and integrating AFIP’s information
and communication technology with their data management capacity; (iii) improving the
functioning of the single taxpayer account; and (iv) improving the administration of the small
taxpayers’ (monotributo) regime. There will also be support to the provinces in their effort to
modernize their tax administration.
PROTECTIONS FOR THE MOST VULNERABLE

15. The authorities are keen to minimize the effects of the adjustment on the most
vulnerable. The economic prospects over the near-term are highly uncertain and much will
depend on investor confidence. The program, therefore, puts in place safeguards to protect
Argentina’s most vulnerable. In addition, contingency measures will provide resources to the
poor in the event that social outturns worsen relative to the outlook that underpins the
program. These protections include:
 A program floor on federal government spending on social assistance (a quarterly

performance criterion) equivalent to 1.3 percent of GDP (or AR$177 billion) in 2018 and at a
level that safeguards program coverage for 2019–20 while allowing benefits to rise according
to the existing indexation formula. This represents an effort by the government to ensure
that such spending is prioritized and protected within the budget. The focus will be on
programs that cover children through the existing social safety net: the universal child
allowance program (Asignación Universal por Hijo, AUH) and the allowance for pregnant
mothers (Asignación por Embarazo, AUE). Both programs (which together comprise the

ARGENTINA
Asignación Universal para Protección Social) are efficiently administered, have reasonably
wide coverage, and have been shown to improve socioeconomic outcomes in the target
population. In addition, the floor will protect social spending on contributory family
allowances (including allowances to monotributistas which are included under the budgetary
program named Asignaciones Familiares). Table 1 provides quantitative information on the
nature of coverage and the level of spending on these programs.
 An adjustor to the primary deficit to prioritize additional spending on pre-specified,

high-impact social assistance programs. If economic conditions worsen such that the
government judges either the benefits under the universal child allowance program to be
insufficient or the level of enrollment becomes higher than expected, spending on this
specific program can be increased by up to 0.2 percent of GDP (or AR$30 billion) per
calendar year.
Table 1. Priority Social Protection Programs
2016 2017 2018 Proj.
Programs to which floor on social assistance spending applies
Number of Beneficiaries (million) 7.8 8.1 8.5
Total spending (AR$ bn) 107.6 141.9 177.5
Total spending (in percent of GDP) 1.3 1.3 1.3
Coverage of those families in first or second decile, in percent … 66.5 …
Asignaciónes Familiares
Asignación Universal para Proteccion Social
Coverage as percent of number of persons in poverty 46.7 55.5 …
Memorandum Items
Total number of people in poverty (million) 8.3 7.1 …
Sources: INDEC, Cuenta de Inversion, Budget 2018, and "Analisis y Propuestas de Mejoras Para Ampliar
la Asignacion Universal por Hijo" (ANSES, UBA, CEDLAS, UNICEF).

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16. To protect the most vulnerable the government also intends to:
 Work with the World Bank and IDB to identify measures that can be taken to protect
households and individuals that have no children, since this part of the population is
insufficiently covered by the existing social safety net and is likely to be affected by any
worsening of social conditions.
 Work with the provinces to integrate the provision of social services to those in poverty,
reducing duplication, improving targeting and lowering the administrative costs of their
social programs.
 Following a comprehensive review, revise the social tariffs system to make it better protect
the bottom four deciles of the income distribution.
SUPPORTING GENDER EQUITY

17. In addition to the broader social assistance protections that the government has
proposed, special attention will be given to provide support to women. There is clear
gender inequality in the Argentine labor market, with female labor force participation well
below that of other Latin American economies. In Argentina, 39 percent of women work in
the informal sector (versus 34 percent of men) and there is a 24 percent wage gap between
women and men. This is a macroeconomically relevant bias that has important consequences
for growth, income inequality, and broader social cohesion and equity.
18. To help lessen these negative outcomes, the authorities intend to:
 Eliminate the second-earner penalty in the current tax system which will encourage
participation of second-earners in the labor force.
 Continue investing in publicly-funded infrastructure for childcare and early childhood

education.
 Introduce legislation to equalize maternity and paternity leave.
 Introduce legislation that requires listed companies to publish data annually on the gender
balance on their Board and among their managerial positions.
 Introduce legislation that will increase penalties on perpetrators of gender-based or

domestic violence and provide support networks for victims of such violence.

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MONETARY FRAMEWORK UNDERPINNING THE

PROGRAM
19. The reform program will aim to strengthen the credibility of the inflation targeting
framework. Argentina adopted inflation targeting (IT) at a time when inflation rates were
high and the central bank’s credibility had not yet been fully entrenched. As a result, inflation
has repeatedly surprised to the upside, expectations have not aligned with announced
targets, and the IT framework has not delivered the nominal anchor it promised. The
program will thus support the building of institutional strength of the central bank, reducing
the fiscal pressure that undermined prior efforts at disinflation, and ensuring a freely floating
exchange rate.
20. Going forward, monetary policy will focus on achieving single-digit inflation by
end-2021, within the context of a flexible exchange rate regime. With steps already
taken toward renewed independence, the central bank has revised its inflation targets, to
reach single digit inflation by end-2021. These targets balance a realistic outlook with an
ambitious path for disinflation that is consistent with the macro-framework underlying the
program. Program conditionality for monetary policy will include an inflation consultation
clause centered on the authorities’ inflation targets. If the 12-month inflation rate were to
breach the inner inflation band, this will trigger a consultation with staff on the appropriate
policy response. If the outer band were to be exceeded, the authorities will complete a
consultation with the Executive Board on their proposed policy response before being
eligible for further purchases under the program. Both bands will gradually narrow over time
as the inflation process becomes more stable. In addition, to provide additional protections
given the uncertainty over both the demand for money and the likely path for future
inflation, if net domestic assets of the central bank were to exceed the thresholds established
in the program, this same clause would be triggered, requiring a consultation with the
Executive Board on the authorities’ proposed policy response before being eligible for further
purchases under the program.
Inflation Targets and Consultation Bands

(y/y, in percent)
Dec-2018 Dec-2019 Dec-2020 Dec-2021
Outer Band - Upper Limit 32 21 16 11
Inner Band - Upper Limit 29 19 15 10
Midpoint 27 17 13 9
Inner Band - Lower Limit 25 15 11 8
Outer Band - Lower Limit 22 13 10 7

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21. The BCRA has committed to not loosen monetary policy until there are clear signs
of a decline in both end-2019 inflation expectations and in realized year-on-year
inflation outcomes. Staff expect domestic nominal contracts to become more forward-
looking as targets are met and credibility is re-established. In this regard, it will be important
that the government aim to ensure that, over the duration of the program, public sector
wage agreements are kept in line with the government’s inflation goals.
22. In addition, the authorities have taken a key set of actions that they view as critical
for the successful implementation of their policy plan including:
 Issuing a memorandum of the Ministry of Finance that ends all new direct or indirect central
bank net financing of the government. This constitutes a key step in helping to strengthen
the credibility of the BCRA’s inflation targeting framework and in lowering inflation
expectations. The program further includes a continuous performance criterion on providing
no new central bank net financing to the government, including through the distribution of
unrealized gains derived from currency depreciation.
 Publishing a central bank communication to formally adopt the new inflation targets
(specified above). Staff considers that the completion by the authorities of these actions
meets the test (i.e. that the upfront implementation of the measure is critical for the success
of the program) for prior actions.
23. Lessening the BCRA’s vulnerability from a large stock of short-term, peso-
denominated debt (LEBACs) will be a key component of the program. The program
includes a plan to reduce the BCRA’s net claim on the government—that includes short-term
credits and nontransferable Treasury bonds—by at least US$10 billion by end-March 2019,
and by US$25 billion by end-May 2021. Quarterly performance criteria have been established
for the first steps in this process (and further quarterly performance criteria will be
established at future reviews). This operation will be financed through the issuance of peso-
denominated securities in the local market. The repayment of government liabilities held by
the central bank will be used to drain peso liquidity, thereby lessening the central bank’s
reliance on issuing its own (LEBAC) securities. By end-September 2019, the BCRA will limit its
counterparties for sale of LEBACs, open market operations, and repos to local banks to
encourage re-intermediation through the banking system and to enhance the BCRA’s control
over peso liquidity. By end-May 2021, the central bank is expected to have reduced the stock
of LEBACs from the current 10 percent of GDP to about 3.5 percent of GDP. To facilitate
these changes will require a closely coordinated approach. In this regard, the government
intends to establish a senior-level, debt management coordinating committee between
Treasury-Finance-BCRA that would meet weekly and coordinate activities linked to
sterilization actions of the BCRA and debt issuance plans of the Finance Ministry (an end-
September 2018 structural benchmark).
24. To ensure the central bank’s financial autonomy, the government will provide
resources to recapitalize the BCRA. Following an independent assessment of the BCRA’s

ARGENTINA
balance sheet, the government will inject the necessary amount of peso-denominated,
interest-bearing marketable securities onto the central bank’s balance sheet to achieve an
adequate level of capital by end-December 2019. This will be accompanied by an
agreement––to be formalized under the planned revisions to the BCRA charter described
below––that distributable central bank profits (excluding unrealized gains) will be remitted
each year in the form of a transfer to the Treasury for as long as the central bank’s capital
exceeds the adequate level of capital. If its capital declines below that level, the BCRA will be
allowed to retain its distributable profits entirely.
25. The central bank is committed to maintaining a floating exchange rate, with
foreign currency sales restricted to countering periods of clear market dysfunction. The
exchange rate will be allowed to fully adjust to prevailing market conditions.
 The program will include a floor on the change in net international reserves of the central
bank (measured relative to June 4 stock) of +US$5.5 billion by end-June 2018 and remaining
at that level for the remainder of 2018. Upon approval of the arrangement, NIR will rise by
US$7.5 billion as a result of the IMF’s direct budget support. The NIR floor in the program
would rise to +US$7.5 billion by June 2019 and to +US$28 billion by June 2021 as the central
bank builds reserves to safer levels. The goal would be for reserves to exceed 100 percent of
the Fund’s ARA metric by the end of the arrangement so as to provide sufficient
precautionary foreign currency liquidity so as to mitigate potential risks to the balance of
payments. An adjustor to the NIR floor will be incorporated to allow for the use of up to
US$7.5 billion in budget support to either extinguish foreign currency obligations of the
federal government or to sell to the market, in a transparent and pre-announced central
bank auction to meet peso expenditure needs of the budget.
 The program includes a quarterly ceiling on the stock of non-deliverable forwards (NDF). The
notional amount of non-deliverable forwards will be gradually reduced from US$2.3 billion
on June 4, 2018 to US$1 billion by end-June 2019.
 The central bank will also initiate a consultation with staff if its net foreign exchange sales in
spot and forward markets are excessive. This consultation will involve a general overview of
monetary and intervention policies with a goal of identifying how best to allow for greater
exchange rate depreciation or to raise domestic interest rates and tighten liquidity conditions
in the event of a reduced demand for pesos.
 Finally, the BCRA will publish, by end-September 2018, a regulation to introduce a foreign
exchange auction to intervene in the spot and forward markets.
26. BCRA charter. To strengthen the monetary policy framework and central bank
governance, the government will submit a draft of a new BCRA charter to Congress by end-
March 2019 (structural benchmark). The details of the required legislative amendments will
be specified during the safeguards assessment (to be undertaken prior to the first program
review), especially regarding the governance and the status of the BCRA’s official foreign

ARGENTINA
reserves. While passage of this new charter requires congressional approval, the authorities
have committed to propose legislation that will:
 Reinforce price stability as the key objective of the BCRA.
 Prohibit all new, direct or indirect central bank financing of the Government.
 Entrust the competence for monetary policy formulation to the new Executive Board
including giving the BCRA’s Executive Board the authority to set, in consultation with the
Ministry of Finance, the inflation targets for three years ahead.
 Strengthen the avenues of BCRA accountability with Congress and the Argentine people
(including an accountability mechanism for when inflation deviates from the BCRA’s inflation
objective by a pre-set amount).
 Provide for well-defined, and limited, grounds and procedures by which the Governor, Vice-
Governor, Board of Directors, and Executive Board members could be dismissed from their
posts.
 Improve transparency by restoring international accounting standards, to ensure a

transparent report of the Central Bank’s balance sheet.
 Clarify the legal status of the BCRA’s official foreign reserves, which should only serve to
implement exchange rate and monetary policies.
 Establish in the charter the adequate level of capital for the BCRA, the process for automatic
recapitalization, profit sharing and retention rule, as well as the retention of unrealized gain
and losses.
 Strengthen the central bank governance arrangements to support its autonomy.
In anticipation of approval of this legislation, the administration has indicated its strong
commitment to treat the central bank as operationally independent with monetary policy
decisions to be taken by the Monetary Policy Council in accordance with the Council’s forward-
looking views on inflation prospects.
THE BANKING SYSTEM

27. At present, there are no material signs of strain in the banking system. While there
has been some modest rotation of deposits out of pesos and into U.S. dollars, there has been
no sign of a run on deposits. The Argentine banking system is small (bank credit amounts to
only 16 percent of GDP); well-capitalized (regulatory capital was 15 percent of risk-weighted
assets at March 2018, with 90 percent of that amount in the form of tier-1 capital); and liquid
(liquid assets cover over 45 percent of short-term liabilities). Exposure to the sovereign is
limited, especially for private banks, as a result of prudential regulation and the history of

ARGENTINA
monetary financing of fiscal deficits. There are, however, important data gaps including those
relating to real estate transactions, cross-border activities, and non-bank financial
institutions.
28. Nonetheless, there is a potential for a worsening in both bank and corporate
balance sheets that may need to be handled within the program framework. Despite the
relatively favorable starting position of the banks, real interest rates are likely to remain high
for some time and the economy will slow. This will put upward pressure on nonperforming
loans (which stood at 1.9 percent of the loan portfolio in March 2018 and were fully
provisioned) and constrain the provision of new credit to the economy. The first review
mission will be joined, therefore, by MCM experts who will (i) assess the authorities’
preparedness to handle strains in the banking system (including reviewing Argentina’s bank
resolution framework) and (ii) to develop a contingent strategy in the event there are either
significant liquidity strains (e.g. from deposit outflows) or a weakening of the balance sheets
from a substantial rise in bad loans.
29. As pressures on the capital account grew, the BCRA lowered the limit on net long
foreign exchange positions from a monthly average balance of 30 percent to a daily
balance of 10 percent of banks’ previous month’s net equity. The measure was
implemented in a near-crisis situation amid intense peso depreciation and BOP pressures,
and was accompanied by other policy responses to stem capital outflows. However, the
measure was designed to limit capital flows and thus constitutes a capital flow management
measure. In managing the capital account risks faced by Argentina, a key role was played by
macroeconomic policies (notably an increase in policy interest rates, a tightening of the fiscal
position, and a depreciation of the peso). As such, this CFM does not substitute for or avoid
warranted macroeconomic adjustment but rather has been used to support macroeconomic
policy adjustment. The CFM implemented by the central bank is viewed as consistent with
the Fund’s institutional view on capital flows.
MACROECONOMIC FRAMEWORK AND RISKS

30. The recent market disruptions and the expected fiscal contraction will lead to a
slowdown in 2018. The implied fiscal multipliers underpinning the program, at a one-year
horizon, are 0.8 on average for changes to spending (at constant prices) and 0.6 for changes
to tax revenues. This is consistent with the range of multiplier estimates for Latin American
countries (see chapter 4 in April 2018 Regional Economic Outlook: Western Hemisphere).
While high real interest rates and fiscal retrenchment will be a drag on growth, the significant
real peso depreciation will be a countervailing force, improving competitiveness and
supporting external adjustment. In addition, a strong recovery in the agriculture sector—
which is typical in Argentina following a drought—will contribute to growth in the second
half of this year. The expected gradual restoration of market confidence should also reverse
the drag on activity. The slowdown in 2018 will, however, serve to put downward pressure on
core inflation to mitigate the upward pressure from the currency depreciation and the

ARGENTINA
planned faster pace of realigning utility tariffs with international prices (particularly in the
context of higher world energy prices and a weaker peso).
31. Steady implementation of policies should, however, spur a growth acceleration into
2019. Growth is expected to be around 1½ percent in 2019. The economy will continue to
improve into 2020 with growth eventually rising above potential, to around 3 percent,
beginning the process of closing the output gap. The rebalancing of the policy mix will
facilitate a broader re-composition of demand from the public to the private sector with
consumption and investment being the primary drivers in 2019–20. Further progress in
addressing corruption would strengthen the business climate and build public support for
reforms. As the government’s commitment to the objectives of the program become
entrenched, market confidence should be restored, leading to a progressive reduction in
short-term interest rates and a modest rebound in the peso.
32. A lower primary deficit of the federal government and a weaker peso will facilitate
a contraction of the current account deficit to 2¼ percent of GDP by 2021. A return of
capital inflows, lower government interest payments, and disbursements from the Fund will
allow for gradual reserve accumulation. Gross reserves are forecast to reach around US$88
billion (or 115 percent of the ARA metric) by end-2021.
33. Debt is expected to peak at end-2018 and fall steadily thereafter. The fiscal
adjustment, economic recovery, and lower real interest rates (as and central bank credibility
is established) will all work to place public debt-to-GDP ratio on a steady downward
trajectory from 2019 onwards (see DSA). After peaking this year at 65 percent of GDP, debt
would fall under the planned fiscal consolidation to below 56 percent of GDP by the last year
of the program. Gross fiscal financing needs remain elevated for much of the program period
but are not projected to breach the 15 percent of GDP risk threshold in the baseline
throughout the medium term.
34. There are still important risks to debt sustainability. The most evident near-term risks
are linked to:
 The size of the gross fiscal financing needs under a stressed scenario.
 The large share of foreign currency debt (which makes Argentina’s debt dynamics susceptible
to a sustained weakening of the real exchange rate) and the large external financing needs
(which, based on international experience, have shown to be a strong predictor of a debt
crisis).
 The fact that the proposed fiscal consolidation is ambitious relative to similar country
situations (i.e., in the top 13 percent of the distribution of consolidations achieved by
program countries).

ARGENTINA
 The DSA covers only federal government debt and so could understate the sustainability of
general government debt. However, most provinces are running close to a balanced budget,
and provincial debt is only 6 percent of GDP.
 The national government faces contingent liabilities from needing to recapitalize the central
bank (this has not yet been built into the DSA given the uncertain size of those
recapitalization needs), from loss-making publicly-owned corporations, and from unfunded
pensions.
These risks are, however, mitigated by the high share of federal government debt that is held by
other public-sector entities and the relatively long maturity of dollar-denominated debt issued
on international markets (only about one-fifth of the government’s US$-denominated debt held
outside the Argentine public sector will mature by end-2020). Overall, staff assesses that,
under the baseline of the program, federal debt is sustainable, but not with a high
probability.
35. The macroeconomic framework underpinning the program assumes that Argentina
draws the first tranche upon approval of the SBA and treats the remainder of the
arrangement as precautionary. The drawing of the first tranche will help bolster market
confidence and add to gross reserves. The indication of an intent to treat the Stand-By
Arrangement (or a portion thereof) as precautionary does not affect the legal character of
the arrangement. As such, this intent is not a binding commitment and does not prevent the
member from making such purchases if all conditions set forth in the arrangement are
fulfilled. When the member requests a purchase under the Stand-By Arrangement it must,
however, represent that it has an actual balance of payments need for such purchase. Given
the expected gradual return to markets to finance the federal deficit, one-half of the
domestic counterpart of Fund resources in the first tranche will be used for direct budget
support. It will be deposited at the Treasury’s account at the BCRA and subsequently
withdrawn, as needed, to pay for budget outlays. The determination of this amount of access
under the program for budget support was based on the federal government’s gross fiscal
financing needs and an assessment about a likely path for new borrowing from the private
sector between now and end-2018 (Table 8). Monetary targets in the program will be
adjusted at the pace at which this budget financing is drawn down. The authorities have
indicated their intention to treat the remaining drawings under the arrangement as
precautionary.
36. Under the program gross reserves reach 115 percent of the ARA metric by end-
2021 and peak at 121 percent of the ARA metric in 2023. This level of reserves provides
some insurance against Argentina’s vulnerabilities that arise from a high degree of
dollarization, elevated external debt levels, vulnerability to a potential further tightening of
global financial conditions, and still-sizable gross financing needs. Access under the program
will also support the authorities’ switch from a reliance on borrowed reserves toward
nonborrowed reserves.

ARGENTINA
37. The path for growth under the

Real GDP Levels
program could be viewed as optimistic.
(Index)
The path for the economy shows a short- 125 Max-Min range of Comparators
lived and limited interruption to growth. 120 25th-75th percentile range of Comparators
This is a very mild downturn relative to 115
Baseline Forecast (trough in 2018Q3)
other Argentine recessions that have 110

occurred since 1992 (excluding the 1999–
105
2002 contraction, see chart). However, the
100
Argentine authorities are confident that,
95
with a rebound in the agricultural sector
t–4 t–3 t–2 t–1 t t+1 t+2 t+3 t+4 t+5 t+6 t+7 t+8
and the pre-emptive way they have dealt Sources: Haver Analytics; IMF, Global Data Source database; national
with the current crisis (including authorities; and IMF staff calculations.
approaching the Fund for support), the economic downturn can be contained.
38. The broad contours of the program would, nonetheless, remain robust to a weaker
macroeconomic outlook. A scenario was constructed that assumes fiscal multipliers that
are about twice as large as those assumed in the forecasts that underpin the baseline. In this
scenario (i) growth would be -0.8 percent in 2018 and 1 percent in 2019; (ii) the nominal
exchange rate would be 5 percent weaker at end-2018 and 6 percent weaker at end-2019;
(iii) nominal policy rates would rise by 4½ percent at end-2018 containing inflation to the top
of the outer inflation consultation band; (iv) an additional ¼ of fiscal measures would need to
be identified to maintain a primary deficit-GDP at program target in 2018, although the pace
of debt reduction would be slower due to weaker growth. In such a scenario, Argentina
would have to draw access under the arrangement until end-2019 and rely on some portion
of the domestic counterpart of Fund resources for budgetary purposes. Gross reserves
accumulation would reach 83 percent of the ARA metric by end-2019 (lower than would be
achieved in the program’s baseline).
AN ADVERSE SCENARIO
39. There is a low probability that a shift in global financial conditions disrupts the
expected return of market confidence. It is possible that a faster-than-expected tightening
of global financial conditions will slow the pace at which investors rollover their investments
in Argentine assets. To model that scenario, staff assumed (Box 1):
 Lower rollover rates on Argentine public debt by both residents and nonresidents (see table).
These are well above the 25th percentile of historical experience.
 A more depreciated path for the real and nominal exchange rate, in line with the persistent
shock to capital inflows and the reduced demand for peso assets.

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(Assumed rollover rates, percent) Program Baseline Adverse Scenario

Residents Nonresidents Residents Nonresidents
International law debt 95 90 85 75
Domestic law debt:
Government (foreign currency) 95 90 85 75
Government (peso) 95 90 85 75
BCRA (peso) 100 75 90 75
 A higher path for nominal and real interest rates that is calibrated to hold inflation at the top
of the inflation target band.
 A recession in 2018 and a more protracted recovery into 2020. The combination of higher
interest rates and weaker confidence would also lower the path for potential growth.
 A need to find an additional 1 percent of GDP in measures to keep the primary deficit from
rising above 2 percent of GDP in 2019 and 1 percent of GDP in 2020. Unfortunately, a lack of
fiscal financing in this scenario makes pro-cyclical policies inevitable.
 A full loss in US$-denominated deposits Portfolio and Other Investment Assets

(around US$7 billion) together with (Probability density, in percent of proceeding 3-year
average of broad money)
about a 2 percent loss in peso deposits. 0.08
The magnitude of the shock is similar to 0.07
the experience during 2008–11 in 0.06

POL4/POL5/ARG
Argentina. As a share of broad money, 0.05 Mexico

2012, 2014
the shock is close to the center of the 0.04
0.03
distribution of past outcomes in
0.02
emerging markets. 25th-pct
0.01
0
 Rollover rates on external debt of the -50 -40 -30 -20 -10 0 10 20
private sector falls from 100 percent to Source: Fund staff calculations.
90 percent.
 In the baseline forecast, FDI is assumed to remain relatively strong, buoyed by improved
investor confidence and PPP projects. In the adverse scenario, FDI drops by 45 percent,
putting it at the 25th percentile of historical experience.
40. Under this adverse scenario, federal debt would be 4 percent of GDP higher than in
the baseline by end-2021. Gross fiscal financing needs would also be more elevated
throughout the projection period. In particular, under the adverse scenario there would be an
additional US$35 billion in external financing needs which would be met by Argentina
drawing the full amount of access under the Stand-By Arrangement. In addition, even with
these drawings, the reserve path would be lower than in the baseline (due to a combination
of no new issuances by the federal government on international markets and the assumption

ARGENTINA
that the domestic counterpart of the access drawn under the arrangement would be made
available to be used as budget support). In this scenario, it is important to highlight that
the federal debt remains sustainable, but not with a high probability.
Table 2. Macroeconomic Outlook: Baseline and Adverse Scenarios

(Percent unless otherwise indicated)
2017 2018 2019 2020 2021 2022 2023
Program Baseline
GDP Growth 2.9 0.4 1.5 2.5 3.1 3.1 3.2
CPI inflation (eop) 24.8 27.0 17.0 13.0 9.0 5.0 5.0
Federal primary balance (percent of GDP) -3.8 -2.7 -1.3 0.0 0.5 0.9 1.2
Federal debt (percent of GDP, DSA) 57.1 64.5 60.9 57.4 55.8 54.1 53.0
Gross international reserves (US$ bns) 55.1 65.4 69.0 79.7 88.4 96.0 103.8
(share of ARA metric) 92% 100% 101% 110% 115% 119% 121%
Nominal policy rate (eop) 28.8 37.2 22.5 15.8 11.0 10.0 9.7
Change in REER (y/y, eop; "+"=appreciation) 5.4 -18.1 3.9 0.7 0.1 0.0 0.0
Current Account (percent of GDP) -4.8 -3.6 -3.2 -2.7 -2.2 -2.1 -2.1
Adverse Scenario
GDP Growth 2.9 -1.3 0.0 1.0 1.2 1.7 2.3
CPI inflation (eop) 24.8 31.7 20.8 15.0 10.0 9.0 5.0
Federal primary balance (percent of GDP) -3.8 -2.0 -0.9 -0.2 -0.1 0.2 0.4
Federal debt (percent of GDP, DSA) 56.8 68.6 65.4 60.0 59.8 59.0 57.9
Gross international reserves (US$ bns) 55.1 54.3 53.6 54.2 57.1 73.7 89.7
(share of ARA metric) 92% 84% 79% 75% 74% 89% 101%
Nominal policy rate (eop) 28.8 43.0 26.8 16.5 15.3 10.8 10.3
Change in REER (y/y, eop; "+"=appreciation) 5.4 -24.0 2.2 0.0 0.0 0.0 0.0
Current Account (percent of GDP) -4.8 -3.0 -1.2 -1.0 -0.5 -0.3 -0.2
Source: Fund staff estimates and projections.

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Box 1. Argentina and Selected FCL/PLL Countries: Comparing Adverse Scenarios1
Foreign Direct Investment Private Sector Rollover

0.01 COL1 0.01
MEX2
COL2
MEX3 MEX2/POL3/
POL4 MEX4
0.008 COL3
ARG
POL5 MKD/POL3
0.008
COL4
ARG POL2/COL3 POL4 MKD
Probability density
POL2
Probability density
0.006 POL1
0.006 COL2
MEX4
MEX3
COL4
POL1
0.004
0.004 COL1
MEX1
0.002
0.002
25th-pct
0 25th-pct MAR
0 20 40 60 80 100 120 140 160 180 200
FDI relative to proceeding 3-month average 0
0 20 40 60 80 100 120 140 160 180 200
Rollover rate
Public Medium to Long Term Rollover Public Short-Term Rollover

0.01
0.01
POL2/ME
X4
MEX6,
0.008 MEX7, MKD/POL4
0.008 COL6
ARG
MEX3/ POL3
Probability density
ARG MEX4 MEX1

Probability density
MEX1
POL1 POL1 MAR
0.006 0.006 COL2
MEX3
POL5 MKD MEX2 COL3
COL1 COL4
0.004 MAR 0.004
COL1
0.002 COL2 0.002
POL2
COL3
POL3 25th‐pct
25th-pct COL4 0
0 0 20 40 60 80 100 120 140 160 180 200
0 20 40 60 80 100 120 140 160 180 200
Rollover rate
Rollover rate

1/ The empirical distributions are based on countries' actual experiences during the crisis year (for all four types of debt rollover
rates), or countries' experiences during the crisis year relative to preceding 3- year average (for FDI). For the presented FCL/PLL
country cases, shocks are defined according to the adverse scenario and placed on the kernel curve.

ARGENTINA
Argentina: External Financing Requirements and Sources in Access Scenario

(In billions of U.S. dollars)
2018 2019 2020 2021
Contribution to Contribution to Contribution to Contribution to
2017 Baseline Adverse Gap Baseline Adverse Gap Baseline Adverse Gap Baseline Adverse Gap
Gross external financing requirements 96.8 139.7 131.8 -7.9 124.5 110.0 -14.4 113.0 97.2 -15.8 112.3 94.6 -17.8
Current account deficit 30.8 19.9 15.9 -3.9 18.6 6.0 -12.6 16.7 5.2 -11.5 14.6 3.0 -11.7
Amortization and Service of Bonds and Loans 115.0 115.0 0.0 89.2 89.2 0.0 69.6 69.6 0.0 56.1 56.1 0.0
Public Sector 95.6 95.6 76.6 76.6 58.2 58.2 46.3 46.3
LEBACs 10.8 10.8 3.3 3.3 0.6 0.6 0.0 0.0
Private Sector 8.6 8.6 9.3 9.3 10.8 10.8 9.7 9.7
Accumulation of international reserves 15.7 3.4 -0.8 -4.1 3.6 -0.7 -4.3 10.6 0.6 -10.1 15.7 3.0 -12.8
Other outflows 50.2 1.5 1.7 0.2 13.0 15.5 2.5 16.1 21.8 5.7 25.9 32.6 6.7
Available external financing 96.8 139.7 126.0 13.7 124.5 98.4 26.0 113.0 88.3 24.8 112.3 85.9 26.4
Net FDI inflows 10.7 4.9 2.8 2.1 5.2 2.8 2.4 5.5 3.0 2.5 7.7 4.2 3.5
Financing through Bonds and Loans 114.9 103.4 11.5 89.2 67.1 22.1 69.6 49.2 20.4 56.1 39.7 16.3
Public Sector 95.6 92.0 76.6 58.2 58.2 40.7 46.3 32.4
LEBACs 10.8 3.2 3.3 1.0 0.6 0.2 0.0 0.0
Private Sector 8.6 8.2 9.3 7.9 10.8 8.3 9.7 7.3
Other inflows (including errors and omissions) 86.1 19.9 19.7 0.2 30.0 28.5 1.5 37.9 36.0 1.9 48.6 42.0 6.6
Gap (USD billions) 5.8 11.6 8.9 8.7

Percent of quota 128% 254% 196% 190%
Sources: Argentinian authorities and IMF staff estimates.
PROGRAM MODALITIES
41. In support of their policy plans, the authorities have requested a 36-month Stand-
By Arrangement with a final test date of end-March 2021. The program would aim to
restore confidence, reverse the current run on Argentine assets, and guard against concerns
that Argentina will be unable to meets its large external financing needs.
42. BOP need. Front-loading of access is warranted since the program seeks to address an
actual BOP need in the early stages of the program (including through budget support) as a
result of the tightening of external financing conditions that Argentina is currently facing.
Under the baseline, further drawing under the arrangement would be unnecessary and it will
be appropriate for the authorities to treat the arrangement as precautionary. However, the
program is designed to also provide assurances against a potential BOP need that could
occur in an adverse scenario where global financial conditions tighten, constraining the
government’s ability to issue new debt to meet its sizable gross financing needs.
43. Access and Phasing. Access is proposed to be set at about US$50 billion (1,110 percent
of quota, SDR 35.379 billion, or 8 percent of GDP).
 Under an adverse scenario, the proposed level of access would be sufficient to keep gross
reserves from falling below 74 percent of the ARA metric.
 Thirty percent of access (or SDR 10,613.71 million) would be made available upon approval of
the arrangement with the goal of bringing gross reserves to about 100 percent of the ARA
metric by end-2018. The remaining access will be made available in equal disbursements
upon completion of quarterly reviews of the program. The first review would be considered
by the Board in September 2018, based on end-June performance criteria.

ARGENTINA
 The program assumes that the first tranche is drawn upon approval of the arrangement, but
the authorities will treat the arrangement as precautionary thereafter.
 One-half of the domestic counterpart of the first tranche (SDR 5,306.855 million) would be
made available to be used as budget support. A memorandum of understanding has been
established between the central bank and the government on their respective roles and
obligations. For the amounts used as direct budget support, the resources would be
deposited at the Treasury’s account at the BCRA and then withdrawn, as needed, to finance
the budget.
 The amount of budget support (US$7.5 billion) would be split between FX financing for (i) the
net reduction in the stock of domestic-law FX federal liabilities that are held by the private
sector (US$7 billion of such debt matures between June and end-September); (ii) repayment
of official loans (US$0.6 billion); (iii) service of international-law debt (US$1.7 billion); and
(iv) peso financing to cover the primary deficit and any needed debt amortization and
interest in pesos.
44. Capacity to Repay. Under the baseline macro scenario, where only one tranche is drawn,
Argentina’s capacity to repay is good and reserves would remain adequate (Table 16). Under
the adverse scenario, where all tranches are drawn, Argentina’s capacity to the repay the
Fund is assessed as adequate, although the Fund’s exposure in terms of certain debt service
metrics is at the higher end compared with other exceptional access cases (see the
Supplement on the Assessment of the Risks to the Fund and the Fund’s Liquidity Position for
details). If all purchases were made as scheduled, Argentina’s projected payments obligations
to the Fund would peak in 2023 at SDR 11 billion, or 18 percent of official reserves at a time
when gross reserves are projected to be about US$90 billion (Table 17). Public debt in the
adverse scenario is expected to be sustainable but not with a high probability and to fall as a
share of GDP through the course of the program. International reserves in the adverse
scenario would remain adequate (albeit at lower levels than in the baseline). Argentina’s
impressive efforts over the past few years to strengthen institutions, improve governance,
and increase transparency help provide assurances. Finally, a successful IMF-supported
program in Argentina is likely to significantly reduce perceived sovereign and balance of
payments risks which will be reflected in lower spreads and more open access to global
capital markets.
45. Risks to the Program.
 These are inherent risks, as outlined in the adverse scenario, linked to the pace at which
market confidence can be restored, especially if this was either caused by, or associated with,
an abrupt tightening of global financial conditions. In the event markets view the Fund
program as an opportunity to exit Argentine assets there would inevitably be a significant
real depreciation, much higher real interest rates, and lower growth rates. Such a scenario
would increase the risks to debt sustainability.

ARGENTINA
 There are somewhat lesser risks that arise from a shift in Argentina’s terms of trade (for
example from a fall in global soy prices), disruptions arising from changes in tariff policy by
trading partners, or a weakening of the economies of regional neighbors.
 A rapid return of investor confidence could lead to significant capital inflows and, with still
high inflation, result in an appreciation of the real exchange rate that prevents the REER from
returning—as is assumed under the program—to a level that is consistent with medium-term
fundamentals and desired policies.
 There are further risks arising from the authorities’ strong political commitment to undertake
the needed adjustment. The political pressure on the government, and possibly the social
divisions that creates, could be sizable, particularly in the early stages of the program. If this
were to lead to an inability to implement their policy plans then, not surprisingly, the
framework would not hold together and program outcomes will be far from those that are
forecast in this document.
46. Conditionality and Monitoring. Program performance will be monitored by quarterly

reviews. The first review would be scheduled for Board consideration in September 2018
based on end-June 2018 targets. Quantitative and structural conditionality will be based on
Table 2 and 3 of the authorities’ Memorandum of Economic and Financial Policies.
47. Financing Assurances. The program is fully financed, given firm commitments for
financing for the first 12 months of the arrangement and good prospects for full financing
thereafter. This is based on a comprehensive assessment of the gross external and fiscal
financing needs for the course of the program and realistic assumptions about the prospects
for market issuance in the coming months. The World Bank has provided assurances for new
support equivalent to US$1.75 billion in the next 12 months. The Interamerican Development
Bank has also provided assurances for new budget support of US$0.6 billion during the same
period. These amounts have been incorporated into the baseline under the program.
48. Safeguards Assessment. A safeguards assessment of the BCRA will be completed prior
to the first review of the program. The assessment will also review the process of compiling
monetary program data, including compliance with the Technical Memorandum of
Understanding under the program.
49. Implications for Financial Transactions Plan.3 The disbursement of SDR 10,613.7
million under the emergency financing mechanism represents the largest single purchase
under any Fund arrangement. The timely execution of this disbursement, possibly under
3
The current FTP for the May–October period was approved by the Executive Board on April 27, 2018. See
Decision No. 16368-(18/38) and Financial Transactions Plan and NAB Resource Mobilization Plan for the Period
May–October 2018 (EBS/18/30, 4/19/2018).

ARGENTINA
shortened timelines, will as always, rely on the international and cooperative nature of Fund
financing through its creditor members under the Financial Transaction Plan (FTP). In parallel
to the Executive Board’s consideration of Argentina’s SBA, staff will issue an amended FTP for
the May–October 2018 period, which would augment the quota resources that may be used
in transfers during the plan period. The amended FTP will need to be considered at short
notice and would only become effective upon approval of Argentina’s SBA.
50. Argentina continues to have outstanding arrears to private creditors and the Fund’s
lending into arrears policy will apply.
 The debt exchange undertaken by the government in 2016 reopened capital markets and
resolved the bulk of the arrears that had built up over the past several years with the
previous two administrations. However, a residual amount of arrears to private creditors
remains unresolved (a total of around US$1.3 billion in principal or US$3 billion including
accrued interest).
 Since taking office on December 2015, the current administration has sought to settle the
outstanding claims with the holders of the defaulted bonds. On March 2016, Congress
passed a Debt Authorization Law (Ley de Normalización de la Deuda Pública y Acceso al
Crédito) which repealed various laws prohibiting payment or settlement on untendered debt,
thus allowing the negotiation and settlement with certain debt holders and the issuance of
new debt.
 The Ministry of Finance has designed a debt restructuring and cancellation program with the
aim of reducing the amount of outstanding debt arrears. It has also designed several
information dissemination campaigns—including in Germany, Japan, and Italy—to try to
reach as many debt holders as possible. The Ministry of Finance has continued settling claims
with untendered debt holders throughout this period. The terms offered to them are the
same as those offered to the creditors who accepted in 2016. Litigation initiated by
bondholders that have not responded to Argentina’s settlement proposal (that the bulk of
other creditors accepted in 2016) continues in several jurisdictions. As of end-December
2017, the outstanding principal amount of untendered debt that was not subject to a
settlement agreement totaled approximately US$1.2 billion.
 Staff is of the view that, based on the authorities’ actions, they are making good faith efforts
as required under the Fund’s Lending into Arrears policy.

ARGENTINA
Settlement of Untendered Debt

as of December 31, 2017
(In billions of US$, unless otherwise noted)
Nominal Haircut
Amount Claims Agreements (Percent)
Agreements 5.53 17.44 11.34 35
Pending 1.18 3.29 0.81 75
Total 6.71 20.73 12.15 41
Source: Ministry of Finance.
51. There are limited outstanding arrears to official bilateral creditors. These arrears, of
approximately US$30 million claimed by the French export credit agency, relating to the
building of a gas pipeline in the Tierra del Fuego region of Argentina by a French company in
the late 1970s. The parties are currently in arbitration in the International Chamber of
Commerce International Court of Arbitration.
EXCEPTIONAL ACCESS CRITERIA

52. In view of Argentina’s large balance of payments need, exceptional access would be
required under the proposed program. An evaluation of the exceptional access criteria
finds that:
CRITERION 1. The member is experiencing or has the potential to experience exceptional

balance of payments pressures on the current account or capital account resulting in a need
for Fund financing that cannot be met within the normal limits. The tightening of global
financial conditions and a shift in portfolio preferences away from peso assets have led to
exceptional capital account pressures. It is expected that, with the credible policy plan presented
by the Argentine government and support from the international community, these pressures
will dissipate. However, there is a risk that such a reversal in sentiment could occur over a more
protracted period. Given the large size of Argentina’s external financing need over the course of
the proposed arrangement, this would give rise to a substantial external financing need that
would not be able to be met within the normal limits of access.
CRITERION 2. A rigorous and systematic analysis indicates that debt is sustainable but not
with a high probability; exceptional access is justified as financing from sources other than
the Fund improves debt sustainability and sufficiently enhances the safeguards for Fund
resources. In the baseline scenario—which assumes a partial draw—Argentina’s federal
government debt and gross financing needs are projected to remain below the respective risk
thresholds (70 and 15 percent, respectively); and federal debt-GDP, after peaking this year, falls
steadily over the medium term. There are, however, risks around this baseline: the large share of
foreign currency debt, alongside significant rollover needs, leaves Argentina vulnerable to

ARGENTINA
changing market sentiment; and there are potential contingent liabilities from the broader public
sector. In an adverse scenario where events trigger a full draw of the arrangement, debt is likely
to stabilize at a later date and at a higher level, with continued risks around this trajectory. Staff’s
assessment, therefore, is that debt is sustainable but not with a high probability under both the
baseline and adverse scenarios. Exceptional access in such situations requires the existence of
non-Fund financing that improves debt sustainability and enhances sufficient safeguards for
Fund resources. Staff judges the requisite safeguards to be in place. Notably:
(i) The long maturity of Argentina’s privately-held foreign currency-denominated debt

improves the prospects of adequate private creditor exposure being maintained
throughout the program. Of the outstanding stock of the federal government’s
foreign currency debt held outside the public sector ($156 billion), only about one-
fifth is expected to mature by end-2020.
(ii) Argentina has access to both domestic and foreign financial markets. Provided such
access continues to be on favorable terms and fiscal targets are met, debt
sustainability should improve. The availability of market financing allows for some
smoothing of the adjustment path, supporting higher growth and maintaining
political and social consensus for the program. Argentina is expected to maintain
substantial market access under a range of scenarios, which reduces the risk of Fund
resources being used to pay out private creditors.
CRITERION 3. Staff judges that the member has access to private capital markets on a scale
that would enable the member to meet its obligations falling due to the Fund. Argentina
continues to maintain access to both domestic and foreign financial markets, as evidenced by
recent peso- and US$-denominated bond placements in domestic markets and the rollover of
100 percent of the central bank’s paper that came due on May 16. Global and domestic factors
have, however, tightened external financing conditions and average yields on Argentina’s
external bonds have risen. Staff expects that with the successful implementation of Argentina’s
policy program, combined with support from the international community, there should be a
steady restoration of confidence and a decline in costs of budgetary financing.
CRITERION 4. Staff judges that the policy program provides a reasonably strong prospect of
success, including not only the member’s adjustment plans but also its institutional and
political capacity to deliver that adjustment. The Macri administration, which took office in
December 2015, has shown its adeptness over the past two years in delivering on its policy
priorities and unwinding a significant set of distortions while protecting the most vulnerable from
the burden of adjustment. The administration is committed to prudent policy making,
transparent government, and a strong governance framework. Staff deems the administration’s
institutional capacity and technical competence to be strong and fully able to deliver the core
elements of the expected reform program. However, there is a concern linked to the
government’s ability to build support for possible policy measures that need to be passed by
Congress (given that the governing coalition has a minority in both houses of Congress). Building
a social consensus around the main elements of the program will be both critical and

ARGENTINA
challenging, particularly given the difficult history of IMF lending to Argentina and very divided
social and political views on the net benefits of seeking Fund support. Failing to do so would
raise serious questions about the political sustainability of the authorities’ reform efforts.
Therefore, strong, sustained and consistent policy implementation will be crucial, and broad
societal ownership of the government’s economic plan, including in Congress, will be essential
for program success. Discussions with the authorities already point to strong ownership of their
policy framework and a high-level political commitment to partnering with the Fund in their
efforts. There are, however, already significant domestic criticisms of the Fund’s involvement in
supporting Argentina and this is likely to present an ongoing challenge throughout the course of
the arrangement.
STAFF APPRAISAL
53. Argentina is confronting a difficult situation in international markets and has come
under significant balance of payments pressure. This chain of events has been a
consequence of domestic policy choices, unforeseeable supply-side shocks, and a shifting
environment in international capital markets. The authorities have responded to these shifts
with appropriate policies on both the fiscal and monetary side and are to be commended for
their swift action.
54. While capital outflows have stabilized, and pressures on the currency have waned,
the situation remains fragile and Argentina is vulnerable, particularly to a further
external shock either to the terms of trade or to financial market access. Argentina’s
sizable current account deficit, large external financing need, and relatively undiversified
source of export earnings make it particularly exposed.
55. The program is based on strong ownership of a policy plan that has been
developed by the Argentine government and is custom-tailored for the domestic
situation that the people of Argentina face. The core of the program is centered on an
ambitious fiscal adjustment over the course of the arrangement, underpinned by measures
that are largely designed to contain federal expenditures and realign the government’s
outlays to be consistent with the revenue envelope that the country can mobilize. Equally
important are steps to reinforce credibility of the inflation targets and to construct an
institutional framework for monetary policy that create a well-managed, independent and
financially autonomous central bank.
56. The government has emphasized in its policy plans the critical need to maintain
social cohesion, move toward gender equality, and protect the most vulnerable. The
government’s strong commitment to these principles is clear. It can no longer be the case
that IMF supported programs with Argentina are associated with austerity, worsening
poverty, and a decline in living standards. The burden of the needed adjustment will be
shared fairly across society. Those that are most vulnerable will be assisted by well-designed
government support programs. Further, the program is designed to better realize the
macroeconomic potential from women’s full participation in the labor force and in the

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productive economy; these gains are judged to be large. The authorities’ policy plans aim to
fully capitalize on this economic potential and to ensure all Argentines are included in the
country’s future prosperity.
57. Equally important will be structural measures to strengthen institutions and

facilitate stronger growth. These include a range of fiscal measures to improve the
budgetary process and to provide a medium-term anchor for fiscal policy and for
expectations. In addition, the government intends to redouble its efforts in tax administration
and examine carefully the options for strengthening the pension system. Attention will also
be paid to ensuring the financial system remains resilient and is well-placed to handle any
fallout from a slowing economy and higher real interest rates.
58. The staff supports the authorities request for a 36-month Stand-By Arrangement.
The government’s economic plans will address longstanding vulnerabilities and provide time
to the administration to undertake the needed realignment of policies. They will help ensure
that the debt remains sustainable, that inflation comes down, and that growth and job
creation will both increase alongside a path of declining poverty. As such, their plans merit
the support of the international community.

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Table 3. Argentina: Selected Economic and Financial Indicators

Average Proj.
2009–14 2015 2016 2017 2018 2019 2020 2021 2022 2023
(Annual percentage changes unless otherwise indicated)
National income, prices, and labor markets
GDP at constant prices 1.5 2.7 -1.8 2.9 0.4 1.5 2.5 3.1 3.1 3.2
Domestic demand 2.6 4.2 -1.3 6.3 -1.4 0.5 2.0 2.7 2.8 3.0
Consumption 2.8 4.2 -0.8 3.3 -0.9 1.6 1.9 1.9 1.6 1.7
Private 2.6 3.7 -1.0 3.6 -0.6 2.3 2.5 2.4 1.9 2.0
Public 4.5 6.9 0.3 2.0 -2.2 -2.0 -1.6 -0.9 -0.4 -0.3
Investment 1.6 3.5 -4.9 11.3 -1.2 -2.1 3.0 6.8 8.3 8.3
Private 1.0 4.4 -5.3 11.0 1.9 2.5 4.0 7.1 8.0 6.8
Public 5.0 3.9 -4.7 13.5 -12.0 -19.1 -1.6 5.3 9.8 15.9
Exports -1.0 -2.8 5.3 0.4 5.6 6.8 5.4 5.6 5.8 5.5
Imports 4.4 4.7 5.7 14.7 -2.7 1.6 3.1 3.8 4.1 4.2
Change in inventories and stat. disc. (contribution to growth) 0.1 0.2 0.2 1.6 -0.5 -0.5 0.0 0.0 0.0 0.0
Nominal GDP (billions of Argentine pesos) 2,609 5,955 8,189 10,558 13,240 16,068 18,746 21,227 23,191 25,135
Output gap (percent) … 1.1 -1.8 -1.5 -2.9 -3.7 -3.3 -2.5 -1.8 -1.3
CPI inflation (eop, y/y percent change) … … … 24.8 27.0 17.0 13.0 9.0 5.0 5.0
GDP deflator (y/y percent change) … 26.6 40.1 25.3 24.9 19.6 13.8 9.9 5.9 5.1
Unemployment rate (percent) 7.5 … 8.5 8.4 8.5 8.6 8.4 8.2 8.0 7.8
External sector
Exports f.o.b. (goods, billions of U.S. dollars) 71.9 56.8 57.9 58.4 66.4 71.6 75.3 80.1 84.9 89.6
Imports f.o.b. (goods, billions of U.S. dollars) 60.2 57.6 53.5 64.0 65.7 67.7 72.2 77.4 82.1 86.8
Trade balance (goods, billions of U.S. dollars) 11.7 -0.8 4.4 -5.5 0.7 4.0 3.1 2.7 2.8 2.8
Trade balance (goods) 2.6 -0.1 0.8 -0.9 0.1 0.7 0.5 0.4 0.4 0.4
Terms of trade (percent change) 1.7 -4.4 6.0 -2.7 4.0 -1.9 -3.0 -1.4 -0.3 -0.1
Total external debt 34.7 27.9 34.2 37.0 51.3 52.6 52.0 50.8 50.0 49.2
Savings-Investment balance
Gross domestic investment 16.3 15.6 14.6 14.8 15.1 14.8 14.9 15.5 16.4 17.2
Private 12.7 11.9 11.2 11.3 12.1 12.2 12.4 12.9 13.6 14.1
Public 3.6 3.6 3.4 3.5 3.1 2.6 2.5 2.6 2.7 3.1
Gross national savings 15.7 12.8 12.0 10.0 11.6 11.6 12.2 13.3 14.3 15.1
Private 15.0 15.0 14.9 12.9 13.7 12.8 12.6 13.4 14.1 14.4
Public 0.7 -2.1 -2.9 -3.0 -2.1 -1.2 -0.4 -0.1 0.1 0.7
Current account balance -0.6 -2.7 -2.7 -4.8 -3.6 -3.2 -2.7 -2.2 -2.1 -2.1
Public sector 1/
Primary balance -1.9 -4.4 -4.7 -4.2 -2.8 -1.3 0.2 0.8 1.2 1.3
of which : Federal government -3.4 -3.8 -4.2 -3.8 -2.7 -1.3 0.0 0.5 0.9 1.2
memo : Structural federal primary balance 2/ -1.4 -4.2 -4.5 -3.7 -2.1 -0.6 0.6 0.9 1.2 1.4
Overall balance -2.9 -5.8 -6.4 -6.5 -5.1 -3.8 -2.9 -2.7 -2.6 -2.4
of which : Federal government -2.4 -5.1 -5.8 -6.0 -5.0 -3.7 -3.0 -2.9 -2.7 -2.3
Revenues 31.7 35.4 35.1 34.8 35.0 35.6 35.8 35.8 35.5 35.2
Primary expenditure 3/ 35.0 39.8 39.8 39.0 37.8 36.9 35.6 34.9 34.3 34.0
Total public debt (federal) 40.4 55.1 53.3 57.1 64.5 60.9 57.4 55.8 54.1 53.0
Money and credit

Monetary base (eop, y/y percent change) 27.5 34.9 31.7 21.8 25.9 21.3 18.0 14.5 14.2 13.8
M2 (percent change) 28.7 28.2 30.4 25.8 22.5 25.3 18.6 14.5 14.2 13.8
Credit to the private sector (eop, y/y percent change) 28.9 35.7 31.2 51.3 34.9 21.9 18.0 23.8 16.9 16.2
Credit to the private sector real (eop, y/y percent change) … … … 21.2 6.2 4.2 4.4 13.6 11.3 10.6
Interest rate (eop) 4/ 16.3 32.2 23.9 28.8 37.2 22.5 15.8 11.0 10.0 9.7
Real interest rate (eop), 12-m ahead y/y inflation 4/ … … … 9.7 17.2 8.4 6.2 5.7 4.8 4.5
Real interest rate (eop), 1-m ahead m/m inflation 4/ … … … 7.4 14.2 6.6 4.5 4.5 4.7 4.4
Memorandum items
Gross international reserves (billions of U.S. dollars) 42.0 25.6 39.3 55.1 65.4 69.0 79.7 88.4 96.0 103.8
Net international reserves, (billions of U.S. dollars) 5/ … -1.5 10.3 27.9 29.7 33.4 44.0 54.6 69.8 83.2
Change in REER (eop, percent change) 8.4 5.3 -3.4 5.4 -18.1 3.9 0.7 0.1 0.0 0.0
Sources: Ministerio de Hacienda y Finanzas Públicas, Banco Central de la República Argentina (BCRA), and Fund staff estimates.
1/ The primary balance excludes profit transfers from the central bank of Argentina. Interest expenditure is net of property income from the social security fund before 2016.
3/ Includes transfers to municipalities, but excludes municipal spending.
4/ Average of all LEBAC maturities before 2017 and midpoint of the repo corridor starting in 2017; ex ante real rates.
5/ Assumes that entire first tranche would remain deposited at the BCRA. Projections and program targets will be adjusted accordingly upon changes.

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Table 4. Argentina: Summary Balance of Payments, 2014–23

Proj.
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
(Billions of U.S. dollars)

Current account -9.2 -17.6 -14.7 -30.8 -19.9 -18.6 -16.7 -14.6 -14.7 -15.5
Trade balance in goods 5.5 -0.8 4.4 -5.5 0.7 4.0 3.1 2.7 2.8 2.8
Exports f.o.b. 68.4 56.8 57.9 58.4 66.4 71.6 75.3 80.1 84.9 89.6
Primary products 14.2 13.3 15.7 14.8 18.1 20.8 22.6 24.6 26.8 29.1
Manufactures of agricultural origin 26.4 23.3 23.3 22.5 22.6 22.7 23.4 24.7 25.9 27.2
Manufactures of industrial origin 22.9 18.0 16.9 18.7 22.0 24.7 25.8 27.3 28.6 29.7
Energy 5.0 2.2 2.0 2.4 3.6 3.4 3.5 3.5 3.6 3.6
Imports f.o.b. 62.9 57.6 53.5 64.0 65.7 67.7 72.2 77.4 82.1 86.8
Capital goods (includes parts and accessories) 23.7 23.4 22.4 26.6 26.5 27.6 29.9 32.4 34.9 37.3
Intermediate goods 17.9 17.3 14.8 17.1 17.3 16.9 18.0 19.7 21.4 23.2
Consumer goods 10.0 10.5 11.6 14.7 15.9 17.6 18.7 19.5 19.9 20.3
Fuels and lubricants 11.2 6.4 4.7 5.6 6.0 5.6 5.7 5.8 5.9 6.0
Trade balance in services -4.6 -5.8 -8.2 -9.8 -8.8 -9.0 -9.7 -10.5 -11.0 -11.7
Exports 13.4 13.2 12.8 14.2 13.0 13.7 15.1 16.7 18.0 19.6
Imports 18.0 19.0 21.0 24.0 21.8 22.7 24.8 27.2 29.1 31.4
Primary income, net -11.6 -12.1 -12.1 -15.9 -12.0 -13.8 -10.3 -7.0 -6.6 -6.8
Secondary income, net 1.5 1.1 1.2 0.4 0.3 0.2 0.2 0.2 0.2 0.2
Capital Account 0.1 0.1 0.4 0.1 0.2 0.2 0.2 0.2 0.2 0.2
Financial Account 9.3 18.5 14.5 30.4 19.7 18.4 16.6 14.4 14.5 15.3
Foreign direct investment, net 3.1 10.9 1.5 10.7 4.9 5.2 5.5 7.7 8.8 9.9
Portfolio investment, net -2.3 0.4 35.3 34.7 42.1 23.0 23.6 25.2 20.6 25.4
Derivatives, net 0.2 0.0 -0.2 0.1 0.0 0.0 0.0 0.0 0.0 0.0
Other investment, net 9.5 2.2 -7.7 -0.5 -23.7 -6.2 -1.9 -2.7 -7.3 -12.2
Reserve assets -1.2 4.9 -14.3 -14.6 -3.6 -3.6 -10.6 -15.7 -7.6 -7.8
Errors and Omissions -0.2 -0.9 -0.2 0.3 0.0 0.0 0.0 0.0 0.0 0.0
Overall balance 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
(Percent of GDP)
Current account -1.6 -2.7 -2.7 -4.8 -3.6 -3.2 -2.7 -2.2 -2.1 -2.1
Trade balance in goods 1.0 -0.1 0.8 -0.9 0.1 0.7 0.5 0.4 0.4 0.4
Exports, f.o.b. 12.1 8.8 10.5 9.2 11.9 12.4 12.2 12.1 12.2 12.2
Imports f.o.b. -11.2 -9.0 -9.7 -10.0 -11.8 -11.7 -11.7 -11.7 -11.8 -11.8
Trade balance in services -0.8 -0.9 -1.5 -1.5 -1.6 -1.6 -1.6 -1.6 -1.6 -1.6
Exports 2.4 2.1 2.3 2.2 2.3 2.4 2.4 2.5 2.6 2.7
Imports -3.2 -3.0 -3.8 -3.8 -3.9 -3.9 -4.0 -4.1 -4.2 -4.3
Primary income, net -2.1 -1.9 -2.2 -2.5 -2.2 -2.4 -1.7 -1.1 -1.0 -0.9
Secondary income, net 0.3 0.2 0.2 0.1 0.0 0.0 0.0 0.0 0.0 0.0
Capital Account 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Financial Account 1.7 2.9 2.6 4.8 3.5 3.2 2.7 2.2 2.1 2.1
Foreign direct investment, net 0.6 1.7 0.3 1.7 0.9 0.9 0.9 1.2 1.3 1.3
Portfolio investment, net -0.4 0.1 6.4 5.4 7.6 4.0 3.8 3.8 3.0 3.5
Derivatives, net 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other investment, net 1.7 0.3 -1.4 -0.1 -4.2 -1.1 -0.3 -0.4 -1.1 -1.7
Reserve assets
Memorandum items:
Exports volumes (percent change) -7.8 -1.6 6.8 -0.4 5.8 7.6 5.6 5.7 5.8 5.5
Imports volumes (percent change) -10.8 2.6 3.6 14.2 0.2 0.2 4.0 5.0 5.5 5.6
Gross international reserves (billions of U.S. dollars) 1/ 31.4 25.6 39.3 55.1 65.4 69.0 79.7 88.4 96.0 103.8
Net international reserves (billions of U.S. dollars) 1/ … -1.5 10.3 27.9 29.7 33.4 44.0 54.6 69.8 83.2
Net International Investment Position (percent of GDP) 9.7 8.8 9.3 3.5 9.0 8.0 6.3 5.3 5.1 5.4
Terms of Trade (Index, 2000 = 100) 529.4 505.9 536.1 521.7 542.3 531.9 515.8 508.4 507.1 506.8
Real effective exchange rate (percent change) 6.9 5.3 -3.4 5.4 -18.1 3.9 0.7 0.1 0.0 0.0
1/ Assumes that entire first tranche would remain deposited at the BCRA. Projections and program targets will be adjusted accordingly upon changes.
Sources: INDEC, Fund staff estimates and projections.

Table 5. Argentina: Consolidated Public Sector Operations, 2011–23
Proj.
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
(Billions of Argentine pesos)
Revenues 700.7 891.7 1,150.1 1,584.4 2,106.6 2,871.6 3,669.8 4,633.7 5,718.0 6,705.3 7,594.7 8,234.5 8,859.4
Tax revenues 489.2 613.6 792.1 1,095.7 1,429.9 1,952.8 2,452.0 3,076.3 3,794.8 4,477.1 5,111.0 5,597.4 6,046.6
Social security contributions 167.8 219.5 287.8 378.3 529.5 709.8 919.0 1,153.2 1,429.1 1,673.5 1,890.5 2,013.6 2,167.2
Other revenues 43.7 58.6 70.2 110.4 147.2 209.0 298.8 404.2 494.1 554.7 593.3 623.5 645.6
Primary Expenditures 1/ 735.3 936.4 1,238.5 1,744.6 2,368.9 3,255.5 4,114.5 4,998.7 5,926.7 6,670.7 7,417.3 7,966.1 8,543.9
Wages 227.6 294.4 378.2 523.7 738.7 1,008.4 1,277.9 1,527.6 1,801.6 2,055.8 2,231.3 2,347.5 2,427.7
Goods and services 53.3 64.3 86.3 120.3 169.7 205.8 280.9 313.7 364.5 409.5 451.6 479.3 499.9
Transfers to the private sector 277.2 356.0 466.1 663.0 932.0 1,343.4 1,655.1 2,070.5 2,514.5 2,789.0 3,111.5 3,342.8 3,576.4
Of which: federal pensions 147.1 204.6 272.1 363.4 535.7 734.7 1,022.5 1,312.1 1,643.4 1,927.2 2,173.9 2,368.6 2,511.8
Capital spending 77.7 83.2 121.0 171.6 216.6 280.1 373.4 404.4 416.0 467.6 552.2 634.5 775.3
Other 99.4 138.5 186.9 266.0 311.9 417.9 527.3 682.5 830.0 948.9 1,070.7 1,162.0 1,264.5
Primary balance -34.6 -44.7 -88.4 -160.2 -262.3 -383.9 -444.6 -365.0 -208.7 34.6 177.4 268.4 315.5
Interest cash 25.2 34.9 20.6 34.5 82.3 136.7 240.7 313.4 403.7 582.6 753.0 873.3 916.8
Overall balance -59.8 -79.6 -108.9 -194.7 -344.6 -520.6 -685.4 -678.4 -612.4 -548.0 -575.6 -604.9 -601.3
Revenues 32.2 33.8 34.3 34.6 35.4 35.1 34.8 35.0 35.6 35.8 35.8 35.5 35.2
Tax revenues 22.4 23.3 23.7 23.9 24.0 23.8 23.2 23.2 23.6 23.9 24.1 24.1 24.1
Social security contributions 7.7 8.3 8.6 8.3 8.9 8.7 8.7 8.7 8.9 8.9 8.9 8.7 8.6
Other revenues 2.0 2.2 2.1 2.4 2.5 2.6 2.8 3.1 3.1 3.0 2.8 2.7 2.6
Primary expenditures 1/ 33.7 35.5 37.0 38.1 39.8 39.8 39.0 37.8 36.9 35.6 34.9 34.3 34.0
Wages 10.4 11.2 11.3 11.4 12.4 12.3 12.1 11.5 11.2 11.0 10.5 10.1 9.7
Goods and services 2.4 2.4 2.6 2.6 2.8 2.5 2.7 2.4 2.3 2.2 2.1 2.1 2.0
Transfers to the private sector 12.7 13.5 13.9 14.5 15.7 16.4 15.7 15.6 15.6 14.9 14.7 14.4 14.2
Of which: federal pensions 6.8 7.8 8.1 7.9 9.0 9.0 9.7 9.9 10.2 10.3 10.2 10.2 10.0
Capital spending 3.6 3.2 3.6 3.7 3.6 3.4 3.5 3.1 2.6 2.5 2.6 2.7 3.1
Other 4.6 5.3 5.6 5.8 5.2 5.1 5.0 5.2 5.2 5.1 5.0 5.0 5.0
Primary balance -1.6 -1.7 -2.6 -3.5 -4.4 -4.7 -4.2 -2.8 -1.3 0.2 0.8 1.2 1.3
Interest cash 1.2 1.3 0.6 0.8 1.4 1.7 2.3 2.4 2.5 3.1 3.5 3.8 3.6
INTERNATIONAL MONETARY FUND
Overall balance -2.7 -3.0 -3.3 -4.3 -5.8 -6.4 -6.5 -5.1 -3.8 -2.9 -2.7 -2.6 -2.4
Structural primary balance (General Government) 2/ -2.6 -2.3 -3.5 -3.3 -5.0 -4.8 -3.9 -1.9 -0.3 1.1 1.5 1.6 1.6
Structural primary balance (Federal) 2/ -1.5 -1.7 -3.0 -3.4 -4.2 -4.5 -3.7 -2.1 -0.6 0.6 0.9 1.2 1.4
Structural primary balance (Provinces) 2/ -1.1 -0.6 -0.5 0.1 -0.8 -0.3 -0.2 0.2 0.3 0.4 0.5 0.4 0.2
Sources: Ministerio de Economía y Finanzas Públicas and Fund staff calculations.

1/ Include transfers to municipalities, but exclude municipal spending.
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37
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Table 6. Argentina: Federal Government Operations, 2015–23

Proj.
2015 2016 2017 2018 2019 2020 2021 2022 2023
Revenues 1,609.8 2,180.9 2,754.8 3,512.8 4,373.8 5,174.5 5,925.0 6,479.9 7,008.0
Tax revenues 1,115.2 1,528.3 1,874.4 2,365.2 2,931.8 3,489.0 4,034.6 4,467.8 4,847.5
Social security contributions 419.4 558.1 727.3 912.7 1,137.3 1,333.0 1,505.0 1,592.4 1,710.7
Nontax revenues 75.2 94.6 153.2 234.9 304.7 352.5 385.5 419.6 449.8
Primary expenditures 1,834.4 2,524.5 3,159.0 3,871.1 4,584.8 5,170.4 5,818.6 6,269.2 6,708.1
Federal expenditures 1,331.2 1,835.0 2,232.8 2,694.5 3,188.5 3,480.9 3,862.7 4,131.2 4,420.6
Wages 1/ 236.8 316.8 401.0 489.2 580.9 640.6 680.4 693.4 695.1
Goods and services 1/ 78.9 91.8 121.3 123.3 141.0 153.3 167.7 176.6 182.5
Pensions 535.7 734.7 1,022.5 1,312.1 1,643.4 1,927.2 2,173.9 2,368.6 2,511.8
Current transfers to private sector 322.4 511.0 507.1 594.4 672.3 629.7 674.9 687.2 728.3
Social assistance 138.2 219.9 282.0 351.6 431.9 477.5 534.6 576.2 607.6
Energy 124.0 209.2 125.7 149.3 141.0 95.9 104.5 98.3 107.3
Transport 57.1 80.2 90.5 93.6 99.4 56.4 35.8 12.7 13.5
Other 3.1 1.7 9.0 0.0 0.0 0.0 0.0 0.0 0.0
Capital spending 91.7 117.8 121.1 99.9 78.6 73.9 106.4 147.5 247.5
Other current primary spending 65.7 62.8 59.7 75.5 72.3 56.2 59.4 58.0 55.3
Transfers to provinces 503.2 689.5 926.2 1,176.6 1,396.3 1,689.5 1,955.9 2,138.0 2,287.5
Automatic 406.4 551.6 756.8 1,027.0 1,327.2 1,622.0 1,885.8 2,066.1 2,214.6
Discretionary 96.8 137.8 169.5 149.6 69.1 67.5 70.0 71.9 72.9
Capital 69.2 64.3 86.8 68.8 27.3 18.7 21.2 23.2 25.1
Current 27.6 73.6 82.7 80.8 41.8 48.7 48.8 48.7 47.8
Primary balance -224.6 -343.5 -404.1 -358.3 -211.0 4.1 106.4 210.6 299.9
Interest cash (net of ANSES and public sector) 79 131.3 224.9 301.8 387.8 560.8 724.6 839.1 880.8
Overall balance -303.8 -474.8 -629.0 -660.1 -598.8 -556.7 -618.2 -628.4 -580.9
Memorandum items:
Capital spending, including capital transfers to provinces 160.9 182.0 207.9 168.8 105.9 92.6 127.7 170.7 272.6
Arrears and advances 0.0 -33.0 16.0 0.0 0.0 0.0 0.0 0.0 0.0
Primary balance, accrual basis -224.6 -310.5 -420.1 -358.3 -211.0 4.1 106.4 210.6 299.9
Overall balance, accrual basis -303.8 -441.8 -645.0 -660.1 -598.8 -556.7 -618.2 -628.4 -580.9
Structural primary balance -249.0 -375.2 -392.9 -290.8 -101.2 120.1 204.4 289.2 361.0
(Percent of GDP)
Revenues 27.0 26.6 26.1 26.5 27.2 27.6 27.9 27.9 27.9
Tax revenues 18.7 18.7 17.8 17.9 18.2 18.6 19.0 19.3 19.3
Social security contributions 7.0 6.8 6.9 6.9 7.1 7.1 7.1 6.9 6.8
Nontax revenues 1.3 1.2 1.5 1.8 1.9 1.9 1.8 1.8 1.8
Primary expenditures 30.8 30.8 29.9 29.2 28.5 27.6 27.4 27.0 26.7
Federal expenditures 22.4 22.4 21.1 20.4 19.8 18.6 18.2 17.8 17.6
Wages 1/ 4.0 3.9 3.8 3.7 3.6 3.4 3.2 3.0 2.8
Goods and services 1/ 1.3 1.1 1.1 0.9 0.9 0.8 0.8 0.8 0.7
Pensions 9.0 9.0 9.7 9.9 10.2 10.3 10.2 10.2 10.0
Current transfers to private sector 5.4 6.2 4.8 4.5 4.2 3.4 3.2 3.0 2.9
Social assistance 2.3 2.7 2.7 2.7 2.7 2.5 2.5 2.5 2.4
Energy 2.1 2.6 1.2 1.1 0.9 0.5 0.5 0.4 0.4
Transport 1.0 1.0 0.9 0.7 0.6 0.3 0.2 0.1 0.1
Other 0.1 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0
Capital spending 1.5 1.4 1.1 0.8 0.5 0.4 0.5 0.6 1.0
Other current primary spending 1.1 0.8 0.6 0.6 0.4 0.3 0.3 0.3 0.2
Transfers to provinces 8.5 8.4 8.8 8.9 8.7 9.0 9.2 9.2 9.1
Automatic 6.8 6.7 7.2 7.8 8.3 8.7 8.9 8.9 8.8
Discretionary 1.6 1.7 1.6 1.1 0.4 0.4 0.3 0.3 0.3
Capital 1.2 0.8 0.8 0.5 0.2 0.1 0.1 0.1 0.1
Current 0.5 0.9 0.8 0.6 0.3 0.3 0.2 0.2 0.2
Primary balance -3.8 -4.2 -3.8 -2.7 -1.3 0.0 0.5 0.9 1.2
Interest cash (net of ANSES and public sector) 1.3 1.6 2.1 2.3 2.4 3.0 3.4 3.6 3.5
Overall balance -5.1 -5.8 -6.0 -5.0 -3.7 -3.0 -2.9 -2.7 -2.3
Memorandum items:
Capital spending, including capital transfers to provinces 2.7 2.2 2.0 1.3 0.7 0.5 0.6 0.7 1.1
Arrears and advances 0.0 -0.4 0.2 0.0 0.0 0.0 0.0 0.0 0.0
Primary balance, accrual basis -3.8 -3.8 -4.0 -2.7 -1.3 0.0 0.5 0.9 1.2
Overall balance, accrual basis -5.1 -5.4 -6.1 -5.0 -3.7 -3.0 -2.9 -2.7 -2.3
Structural primary balance 2/ -4.2 -4.5 -3.7 -2.1 -0.6 0.6 0.9 1.2 1.4
Sources: Ministerio de Economía y Finanzas Públicas and Fund staff calculations.
1/ It includes universities.
38 INTERNATIONAL MONETARY FUNDS

ARGENTINA
Table 7. Argentina: Summary Operations of the Financial System, 2015–23

(Billions of Argentine pesos, end of period, unless otherwise indicated)
Proj.
2015 2016 2017 2018 2019 2020 2021 2022 2023
I. Central Bank
Net foreign assets -19.0 162.9 524.5 788.1 974.6 1,357.4 1,793.8 2,348.2 2,896.7
Net domestic assets 642.9 658.8 476.6 472.1 554.5 446.4 270.7 9.6 -213.5
Credit to the public sector (net) 1,194.4 1,459.9 1,741.1 2,155.3 2,047.1 1,938.3 1,806.5 1,627.4 1,447.5
Credit to the financial sector (net) -401.7 -589.4 -681.2 -734.9 -922.9 -1,200.6 -1,190.1 -1,168.7 -1,088.7
Official capital and other items (net) -149.8 -211.8 -583.3 -948.3 -569.6 -291.3 -345.8 -449.1 -572.2
Monetary base 623.9 821.7 1,001.1 1,260.2 1,529.1 1,803.8 2,064.4 2,357.9 2,683.2
Currency issued 478.8 594.6 786.7 990.3 1,201.6 1,417.5 1,622.3 1,852.9 2,108.6
Bank deposits at the Central Bank 145.1 227.0 214.4 269.9 327.5 386.3 442.1 505.0 574.6
II. Consolidated Financial System
Net foreign assets -20.6 196.0 511.0 723.0 912.9 1,302.2 1,743.6 2,307.8 2,866.2
Net domestic assets 1,507.2 1,847.3 2,151.3 2,697.7 3,402.6 3,975.8 4,489.9 4,835.5 5,305.8
Credit to the public sector (net) 1,110.2 1,361.5 1,620.1 2,122.5 2,049.6 1,941.2 1,805.6 1,637.9 1,532.5
Credit to the private sector 858.3 1,124.6 1,701.2 2,298.1 2,801.7 3,304.8 4,092.2 4,782.0 5,554.8
Net capital, reserves, and other assets -461.3 -638.9 -1,170.0 -1,722.9 -1,448.7 -1,270.2 -1,407.8 -1,584.5 -1,781.5
Liabilities with the private sector 1,484.7 2,042.8 2,662.1 3,420.4 4,315.1 5,277.7 6,233.3 7,143.0 8,171.7
Currency outside banks 425.5 527.6 702.0 872.6 1,058.7 1,248.9 1,429.4 1,632.6 1,857.8
Local currency deposits 920.4 1,158.5 1,464.1 1,794.0 2,319.8 2,914.6 3,467.0 3,966.8 4,514.1
Foreign currency deposits 138.7 356.6 495.9 753.8 936.6 1,114.2 1,336.9 1,543.7 1,799.8
I. Central Bank (Percent of GDP)
Net foreign assets -0.3 2.0 5.0 6.0 6.1 7.2 8.5 10.1 11.5
Net domestic assets 10.8 8.0 4.5 3.6 3.5 2.4 1.3 0.0 -0.8
Credit to the public sector (net) 20.1 17.8 16.5 16.3 12.7 10.3 8.5 7.0 5.8
Credit to the private sector -6.7 -7.2 -6.5 -5.6 -5.7 -6.4 -5.6 -5.0 -4.3
Official capital and other items (net) -2.5 -2.6 -5.5 -7.2 -3.5 -1.6 -1.6 -1.9 -2.3
Monetary base 10.5 10.0 9.5 9.5 9.5 9.6 9.7 10.2 10.7
Currency issued 8.0 7.3 7.5 7.5 7.5 7.6 7.6 8.0 8.4
Bank deposits at the central bank 2.4 2.8 2.0 2.0 2.0 2.1 2.1 2.2 2.3
II. Consolidated Financial System (Percent of GDP)
Net foreign assets -0.3 2.4 4.8 5.5 5.7 6.9 8.2 10.0 11.4
Net domestic assets 25.3 22.6 20.4 20.4 21.2 21.2 21.2 20.9 21.1
Credit to the public sector (net) 18.6 16.6 15.3 16.0 12.8 10.4 8.5 7.1 6.1
Credit to the private sector 14.4 13.7 16.1 17.4 17.4 17.6 19.3 20.6 22.1
Net capital, reserves, and other assets -7.7 -7.8 -11.1 -13.0 -9.0 -6.8 -6.6 -6.8 -7.1
Liabilities with the private sector 24.9 24.9 25.2 25.8 26.9 28.2 29.4 30.8 32.5
Currency outside banks 7.1 6.4 6.6 6.6 6.6 6.7 6.7 7.0 7.4
Local currency deposits 15.5 14.1 13.9 13.5 14.4 15.5 16.3 17.1 18.0
Foreign currency deposits 2.3 4.4 4.7 5.7 5.8 5.9 6.3 6.7 7.2
Changes in monetary base (y/y, in AR$ billion)
Monetary base 161.3 197.8 179.4 259.1 268.9 274.6 260.7 293.5 325.3
Foreign exchange purchases -69.5 209.1 266.3 -391.0 101.5 322.4 307.2 379.1 362.3
Public sector 175.7 151.2 142.8 100.1 -260.4 -190.3 -216.8 -208.4 -213.8
Sterilization, net (-) -2.4 -176.6 -226.7 550.7 427.8 142.5 170.3 122.8 176.8
Other items, net 57.5 14.0 -2.9 -0.6 0.0 0.0 0.0 0.0 0.0
Memorandum items:
M2 1/ 1,052.6 1,372.3 1,726.5 2,115.5 2,650.9 3,145.1 3,599.6 4,111.2 4,678.5
M2 (percent change) 1/ 28.2 30.4 25.8 22.5 25.3 18.6 14.5 14.2 13.8
Gross international reserves (US$ billions) 25.6 39.3 55.1 65.4 69.0 79.7 88.4 96.0 103.8
Credit to the private sector (eop, y/y percent change) 35.7 31.2 51.3 34.9 21.9 18.0 23.8 16.9 16.2
Credit to the private sector real (eop, y/y percent change) … … 21.2 6.2 4.2 4.4 13.6 11.3 10.6
Interest rate (eop) 2/ 32.2 23.9 28.8 37.2 22.5 15.8 11.0 10.0 9.7
Real interest rate (eop), 12-m ahead y/y inflation 2/ … … 9.7 17.2 8.4 6.2 5.7 4.8 4.5
Sources: Banco Central de la República Argentina (BCRA) and Fund staff estimates.
1/ Currency in circulation outside banks plus peso-denominated deposits in checking and savings accounts.
2/ Average of all LEBAC maturities before 2017 and midpoint of the repo corridor starting in 2017; ex ante real rates.

ARGENTINA
Table 8. Argentina: External Debt, 2011–23

Proj.
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
(Billions of U.S. dollars)
Total external debt (gross; includes holdouts) 167.5 168.0 167.0 170.4 178.9 189.6 235.7 285.7 303.4 320.7 337.2 348.1 362.0
Percent of GDP 31.7 29.0 27.3 30.2 27.9 34.2 37.0 51.3 52.6 52.0 50.8 50.0 49.2
By type of creditor
Debt to official creditors 30.4 28.1 26.5 38.4 46.0 50.3 55.5 68.1 74.4 80.4 86.4 92.5 98.7
Debt to banks 8.9 9.0 8.3 7.5 6.2 6.5 8.1 9.8 10.4 11.0 11.6 12.0 12.5
Debt to other private creditors 128.2 130.8 132.1 124.5 126.7 132.8 172.1 207.8 218.6 229.2 239.2 243.7 250.9
By type of debtor
Official debt 103.8 103.3 103.0 109.9 113.2 130.2 164.1 207.7 221.8 235.1 247.6 254.9 265.2
Bank debt 5.4 4.2 4.3 4.1 5.3 5.3 8.9 11.3 12.5 14.1 15.7 17.3 18.9
Non-financial private sector 58.2 60.4 59.8 56.4 60.5 54.1 62.7 66.7 69.1 71.5 73.9 75.9 77.9
Sources: Instituto Nacional de Estadística y Censos (INDEC), Banco Central de la República Argentina (BCRA), and Fund staff estimates.
Table 9. Argentina: Public Debt, 2011–23

Proj.
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Gross federal debt 818 1,027 1,396 1,996 3,280 4,366 6,025 8,543 9,786 10,752 11,840 12,536 13,329
By currency:
In domestic currency 307 399 503 666 1,210 1,401 1,904 2,084 2,576 3,028 3,476 4,122 4,519
In foreign currency 511 629 893 1,330 2,070 2,965 4,121 6,460 7,210 7,724 8,364 8,415 8,811
By residency:
Held by external residents 309 352 471 675 1,210 1,727 2,339 3,500 4,334 4,974 5,678 6,163 6,597
Held by domestic residents 509 675 925 1,321 2,069 2,639 3,686 5,043 5,452 5,777 6,162 6,373 6,733
(Percent of GDP)
Gross federal debt 37.5 38.9 41.7 43.6 55.1 53.3 57.1 64.5 60.9 57.4 55.8 54.1 53.0
By currency:
In domestic currency 14.1 15.1 15.0 14.5 20.3 17.1 18.0 15.7 16.0 16.2 16.4 17.8 18.0
In foreign currency 23.4 23.8 26.7 29.0 34.8 36.2 39.0 48.8 44.9 41.2 39.4 36.3 35.1
By residency:
Held by external residents 14.2 13.4 14.1 14.7 20.3 21.1 22.1 26.4 27.0 26.5 26.7 26.6 26.2
Held by domestic residents 23.4 25.6 27.6 28.8 34.8 32.2 34.9 38.1 33.9 30.8 29.0 27.5 26.8
Sources: Ministerio de Economía y Finanzas Públicas and Fund staff estimates.
40 INTERNATIONAL MONETARY FUNDS

Table 10. Argentina: Federal Government Gross Financing Needs and Sources
(US$mn, as of May 31, 2018)
2018 2019
2018 2019 2020 2021
June Q3 Q4 Q1 Q2 Q3 Q4
Primary Balance 3,094 3,999 5,054 631 2,441 1,951 2,466 (1,138) (5,552)
Interest 2,817 2,642 6,011 2,353 4,888 1,917 4,413 19,721 24,349
FX 1,538 1,117 3,844 1,366 3,154 1,116 2,764 12,207 15,072
of which: to non-public sector 756 956 2,829 1,203 2,313 1,038 1,892 9,369 11,567
AR$ 1,279 1,525 2,167 987 1,734 801 1,648 7,514 9,277
of which: to non-public sector 306 507 1,225 452 1,197 429 1,193 4,754 5,869
Amortizations 6,359 15,396 29,789 17,769 20,335 9,036 15,918 47,979 39,651
FX 2,774 6,799 11,870 7,776 13,798 6,527 5,979 25,930 21,430
of which: to non-public sector 2,333 6,524 8,539 5,629 13,694 6,480 5,934 24,149 19,957
AR$ 3,586 8,597 17,920 9,993 6,537 2,509 9,939 22,049 18,221
of which: to non-public sector 173 3,775 1,591 1,825 84 99 100 1,604 1,326
Reducing liabilities with the BCRA 5,000 1,933 314 5,205 1,037 3,820 1,481 6,300 -
Total Needs 17,270 23,970 41,168 82,408 25,958 28,701 16,725 24,278 95,661 72,862 58,448
Deposit drawdown 5,000 2,237 - - - - - - -
IFIs 251 754 754 1,200 1,200 1,200 1,200 1,300 2,400
Intra-Public Sector Rollovers 4,128 5,459 21,055 11,516 7,320 2,743 11,035 21,500 15,500
Private Sector Rollovers 1,347 7,941 7,452 6,930 10,047 6,075 5,580 25,542 26,581
of which: FX 1,344 4,544 6,020 5,105 9,963 5,976 5,480 23,000 23,000
Public Sector New Borrowing 1,500 5,277 11,753 16,750 5,013 5,250 2,603 24,520 13,967
of which: External - 3,000 753 12,000 - - - 10,500 6,000
Total Sources 12,226 21,668 41,014 74,908 36,396 23,581 15,268 20,417 95,661 72,862 58,448
Gap 5,044 2,302 154 7,500 (10,438) 5,120 1,457 3,861 0 0 0

Memo Items:
Interest to Non-residents 743 1,024 2,838 1,156 2,454 1,025 2,157 7,889 4,870
FX 529 669 1,980 840 1,614 724 1,321
AR$ 214 355 858 317 839 301 837
Amortization to Non-Residents 7,276 10,605 8,199 3,033 8,503 3,443 3,369 8,156 10,706
FX 1,907 5,332 6,979 2,624 6,384 3,021 2,766
AR$ 64 1,407 593 217 - - -
LEBACs 5,305 3,866 627 191 2,119 422 603 632 -
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ARGENTINA
Table 11. Argentina: External Gross Financing Needs and Sources

(US$mn, as of May 31, 2018)
2018 2019
2018 2019 2020 2021
Imports G&S 7,971 22,625 23,081 20,510 22,639 23,375 23,846 96,978 104,634
Debt Service 1,306 2,713 4,527 2,846 4,145 2,716 3,849 10,194 6,697
Public Sector 743 1,024 2,838 1,156 2,454 1,025 2,157 7,889 4,870
Private Sector 563 1,690 1,689 1,689 1,691 1,691 1,691 2,305 1,828
Amortizations 7,892 11,709 9,908 4,043 9,094 3,796 3,916 19,636 20,446
Public Sector 1,971 6,739 7,572 2,841 6,384 3,021 2,766 8,156 10,706
Private Sector 616 1,103 1,709 1,011 592 353 547 10,848 9,740
LEBAC to Non-residents 5,305 3,866 627 191 2,119 422 603 632 -
Other outflows 2,882 1,089 (1,707) 13,694 (6,652) (4,191) (3,033) (13,786) (19,422)
Total Needs 20,051 38,136 35,810 93,996 41,093 29,226 25,696 28,578 124,594 113,022 112,355
Exports G&S 7,555 19,848 19,042 20,198 23,292 21,344 20,477 90,343 96,784
FDI 428 573 2,580 989 871 614 2,767 5,521 7,678
IFIs 251 754 754 1,200 1,200 1,200 1,200 1,300 2,400
Private Sector Rollover and Issuances 872 2,617 3,056 2,700 2,283 2,044 2,238 7,531 4,519
LEBAC rollovers of Non-Residents 1,620 1,180 191 19 212 42 60 316 -
Public Sector Rollover and Issuances 1,478 8,054 6,432 14,131 4,788 2,266 2,075 18,656 16,706
Rollover 1,478 5,054 5,679 2,131 4,788 2,266 2,075 8,156 10,706
Issuances - 3,000 753 12,000 - - - 10,500 6,000
Reserve Drawdown (- = accumulation) 756 956 - 1,856 (3,420) (1,814) (239) (10,646) (15,732)
Total Sources 12,960 33,982 32,054 78,996 41,093 29,225 25,697 28,578 124,593 113,022 112,355
Gap 7,091 4,154 3,755 15,000 0 0 (0) (0) 0 (0) 0
Table 12. Argentina: Evolution of the BCRA’s Balance Sheet
(in billions of Argentine pesos unless otherwise stated)
2018 2019
May Jun Sep Dec Mar Jun Sep Dec
Analytical balance sheet (eop, billion ARS)
Net Domestic Assets 433 312 380 472 535 493 471 554
Credit to government 1/ 2204 2309 2221 2157 2113 2065 2057 2049
LEBAC 2/ 1215 1170 1054 782 686 679 686 574
Net Foreign Assets 588 804 783 788 757 871 944 975
Monetary base 1020 1117 1163 1260 1292 1364 1415 1529
Memorandum items
Credit to government (% of GDP) 1/ 17.6% 17.9% 16.3% 15.1% 14.0% 13.1% 12.5% 12.0%
Stock of LEBAC (% of GDP) 2/ 9.7% 9.1% 7.7% 5.5% 4.6% 4.3% 4.2% 3.4%
Growth rate of monetary base (% change, yoy) 34.0% 34.0% 25.9% 29.8% 22.2% 21.6% 21.3%
Growth rate of nominal GDP (% change, yoy) 21.7% 24.5% 23.9% 23.9% 22.0% 20.5% 19.4%
Notes: 1/ As defined in the TMU; 2/ Assumes no sterilization of budget support usage, as permitted by the program adjustors; includes LELIQ.
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Table 13. Argentina: Schedule of Reviews and Purchases
Amount of Purchase
Available on or after SDR millions % Quota Conditions 1/
June 20, 2018 10,613.71 333% Approval of Arrangement

September 15, 2018 2,063.78 65% First Review and end-June 2018 performance criteria
December 15, 2018 2,063.78 65% Second Review and end-September 2018 performance criteria
March 15, 2019 2,063.78 65% Third Review and end-December 2018 performance criteria
June 15, 2019 2,063.78 65% Fourth Review and end-March 2019 performance criteria
September 15, 2019 2,063.78 65% Fifth Review and end-June 2019 performance criteria
December 15, 2019 2,063.78 65% Sixth Review and end-September 2019 performance criteria
March 15, 2020 2,063.78 65% Seventh Review and end-December 2019 performance criteria
June 15, 2020 2,063.78 65% Eigth Review and end-March 2020 performance criteria
September 15, 2020 2,063.78 65% Ninth Review and end-June 2020 performance criteria
December 15, 2020 2,063.78 65% Tenth Review and end-September 2020 performance criteria
March 15, 2021 2,063.78 65% Eleventh Review and end-December 2020 performance criteria
June 1, 2021 2,063.71 65% Twelfth Review and end-March 2021 performance criteria
Total 35,379 1110%

1/ Apart from periodic performance criteria, conditions also include continuous performance criteria.
Table 14. Argentina: Quantitative Performance Criteria, Indicative Targets, and Consultation Clauses 1/2/
(In billions of Argentine pesos unless otherwise stated)
Proposed Performance Criteria Indicative Targets
2018 2019
end-Jun end-Sep end-Dec end-Mar end-Jun
Fiscal targets
Performance Criteria
1. Primary balance of the federal government (floor) 3/ 10/ -148.0 -256.0 -362.5 -32.0 -100.0
2. Federal government accumulation of external debt payment arrears (ceiling) 4/ 0.0 0.0 0.0 0.0 0.0
3. Federal government accumulation of domestic arrears (ceiling) 5/ 8.2 14.9 21.6 27.1 39.7
4. Social assistance spending (floor) 87.7 131.1 177.5 60.0 112.6
Indicative targets
5. Primary balance of the general government (floor) 3/ -163.0 -272.0 -382.4 -40.0 -110.0
Monetary targets
6. Change in net international reserves (floor) 6/ 10/ 5.5 5.5 5.5 5.5 7.5
7. Change in stock of non-deliverable FX forwards (ceiling) 7/ 1.0 0.0 -0.5 -1.0 -1.5
8. Change in central bank credit to government (ceiling) 8/ 0.0 -78.0 -156.0 -234.0 -312.0
9. Central bank financing of the government (ceiling) 4/ 0.0 0.0 0.0 0.0 0.0
Inflation Consultation Clause
10. Inflation bands (in percent, y-o-y)
Outer Band (upper) 32 32 32 28 26
Inner Band (upper) 29 29 29 26 24
Center inflation target 27 27 27 24 22
Inner Band (lower) 25 25 25 22 20
Outer Band (lower) 22 22 22 20 18
11. Change in net domestic assets of the central bank (ceiling) 9/ 10/ 15 64 166 173 184
1/ Targets as defined in the Technical Memorandum of Understanding (TMU).

2/ Based on program exchange rates defined in the TMU.
3/ Cumulative flows from January 1 through December 31.
4/ Continuous performance criterion.
5/ The accumulation is measured against the average during Q4 2017, which stood at 45.6 billion pesos.
6/ In billions of U.S. dollars. The change is measured against the value on June 4, 2018.
8/ The change is measured against the value on end-May 2018, which stood at 2,204.4 billion pesos, as defined in the TMU.
9/ The change is measured against the value on end-May 2018, which stood at 432.9 billion pesos, as defined in the TMU.
10/ Targets subject to adjustors as defined in the TMU.
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Table 15. Argentina: Structural Program Conditionality
ARGENTINA
Structural Benchmarks Timing Implementation status
Publish a regulation to introduce a foreign exchange auction for BCRA intervention in the spot and forward
1 Jun-2018 Proposed
markets.
Establish a senior-level debt management coordinating committee between Treasury-Finance-BCRA that

2 Sep-2018 Proposed
would meet weekly and coordinate activities linked to sterilization and debt issuance plans.
Present a 2019 budget to Congress, with transparent medium-term objectives for the primary balance, that
are consistent with the parameters of the program. The budget would include details on realistic and
3 prudent macroeconomic assumptions underlying the medium-term budget, a statement of fiscal risks and of Oct-2018 Proposed
tax expenditures, and details on the key policy measures that will be undertaken to achieve the 2019 primary
balance objective. The budget will include the elimination of article 27 of Law 11,672.
Provide sufficient resources to the newly created CBO (Oficina de Presupuesto del Congreso), so that it can
effectively evaluate macroeconomic and budgetary forecasts (including those contained in the annual
4 Dec-2018 Proposed
budget and MTFF), provide independent costing to Congress of new policy initiatives, assess the
government’s fiscal plans (including the annual budget), and monitoring public finances at the central level.
Submit to Congress a new charter for the central bank that will ensure operational autonomy, strengthen the
5 BCRA’s monetary policy mandate, enhance decision-making structures, and buttress transparency and Mar-2019 Proposed
accountability
6 Limit the BCRA’s counterparties for sale of LEBACs, open market operations and repos to domestic banks. Sep-2019 Proposed
Recapitalize the central bank to ensure it has the adequate level of capital as percent of the monetary base
7 Dec-2019 Proposed
plus the outstanding stock of LEBACs.
Design a compliance improvement plan and risk mitigation strategies around taxpayer segments, taxpayer
8 Jun-2019 Proposed
obligations, and core taxes.

Table 16. Argentina: Indicators of Fund Credit, 2018–26—Baseline Scenario
(In millions of SDRs, unless otherwise specified)
2018 2019 2020 2021 2022 2023 2024 2025 2026
Prospective drawings (36 month SBA) 10,614 0 0 0 … … … … …

(in percent of quota) 333 0 0 0
(Projected Debt Service to the Fund based on Existing and Prospective Drawings) 1/
Amortization 1/ 0.0 0.0 0.0 2,653.4 5,306.9 2,653.4 0.0 0.0 0.0
GRA charges and surcharges 1/ 106.9 293.4 293.5 302.8 159.7 29.0 0.0 0.0 0.0
GRA service charge 1/ 53.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
SDR charges and assessments 1/ 1.5 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1
Total debt service 1/ 161.5 295.5 295.6 2,958.4 5,468.7 2,684.5 2.1 2.1 2.1
(in percent of exports of G&S) 0.3 0.6 0.6 5.3 9.3 4.3 0.0 0.0 0.0
(in percent of GDP) 0.0 0.1 0.1 0.6 1.1 0.5 0.0 0.0 0.0
(Projected Level of Credit Outstanding based on Existing and Prospective Drawings) 1/
Outstanding stock 1/ 10,613.7 10,613.7 10,613.7 7,960.3 2,653.4 0.0 0.0 0.0 0.0
(in percent of quota) 333.0 333.0 333.0 249.7 83.3 0.0 0.0 0.0 0.0
(in percent of GDP) 2.7 2.5 2.3 1.6 0.5 0.0 0.0 0.0 0.0
Memorandum items:
Exports of goods and services (US$ mn) 66,375 71,478 74,966 79,695 84,516 89,228 94,203 99,455 105,000
Gross International Reserves (US$ mn) 65,419 69,034 79,678 88,400 96,031 103,795 111,658 120,116 129,215
% of ARA metric 100% 101% 110% 115% 119% 121% 123% 125% 127%
Quota 3,187.3 3,187.3 3,187.3 3,187.3 3,187.3 3,187.3 3,187.3 3,187.3 3,187.3
Source: Fund staff estimates.
1/ Assumes that the first purchase under the SBA will be made
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Table 17. Argentina: Indicators of Fund Credit, 2018–26—Adverse Scenario
(In millions of SDRs, unless otherwise specified)

2018 2019 2020 2021 2022 2023 2024 2025 2026
Prospective drawings (36 month SBA) 14,741 8,255 8,255 4,127 … … … … …

(in percent of quota) 463 259 259 129
(Projected Debt Service to the Fund based on Existing and Prospective Drawings) 1/
Amortization 1/ 0.0 0.0 0.0 2,911.4 8,918.5 10,134.6 7,997.1 4,643.5 773.9
GRA charges and surcharges 1/ 115.9 530.9 852.4 1,263.3 1,313.1 835.7 380.1 82.6 8.7
GRA service charge 1/ 73.7 41.3 41.3 20.6 0.0 0.0 0.0 0.0 0.0
SDR charges and assessments 1/ 1.5 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1
Total debt service 1/ 191.1 574.3 895.7 4,197.4 10,233.6 10,972.4 8,379.4 4,728.2 784.7
(in percent of exports of G&S) 0.4 1.1 1.7 7.6 17.4 17.7 12.8 6.9 1.1
(in percent of GDP) 0.1 0.2 0.2 1.0 2.4 2.5 1.8 1.0 0.2
(Projected Level of Credit Outstanding based on Existing and Prospective Drawings) 1/
Outstanding stock 1/ 14,741.3 22,996.4 31,251.5 32,467.6 23,549.1 13,414.5 5,417.4 773.9 0.0
(in percent of quota) 462.5 721.5 980.5 1,018.7 738.8 420.9 170.0 24.3 0.0
(in percent of GDP) 4.0 6.4 8.3 8.0 5.6 3.1 1.2 0.2 0.0
Memorandum items:
Exports of goods and services (US$ mn) 66,423 71,993 74,928 79,148 83,929 88,590 93,510 98,703 104,184
Gross International Reserves (US$ mn) 54,277 53,580 54,158 57,120 73,683 89,676 97,346 105,673 114,712
% of ARA metric 84% 79% 75% 74% 89% 101% 103% 105% 107%
Quota 3,187.3 3,187.3 3,187.3 3,187.3 3,187.3 3,187.3 3,187.3 3,187.3 3,187.3
Source: Fund staff estimates.
1/ Assumes that all eligibile purchases under the SBA would be made.
Table 18. Argentina: External Debt Sustainability Framework, 2013–23
(Percent of GDP, unless otherwise indicated)
Actual Projections
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Debt-stabilizing
non-interest
current account 6/
Baseline: External debt 27.3 30.2 27.9 34.2 37.0 51.3 52.6 52.0 50.7 50.0 49.2 -2.3
Change in external debt -1.7 2.9 -2.4 6.4 2.7 14.3 1.3 -0.7 -1.2 -0.8 -0.8
Identified external debt-creating flows (4+8+9) -0.9 3.4 -2.7 6.7 -1.8 2.5 1.6 0.6 -0.4 -0.7 -0.7
Current account deficit, excluding interest payments 1.5 0.9 2.2 1.8 3.6 2.7 2.2 2.1 1.9 1.4 1.6
Deficit in balance of goods and services -3.0 -3.4 -1.9 -3.1 -1.4 -2.5 -3.1 -2.9 -2.9 -3.0 -3.0
Exports 14.7 14.5 10.9 12.8 11.4 14.2 14.8 14.6 14.6 14.8 14.8
Imports 11.7 11.2 9.0 9.7 10.0 11.8 11.7 11.7 11.6 11.8 11.8
Net non-debt creating capital inflows (negative) -1.5 -0.6 -1.7 -0.4 -2.1 -0.9 -0.9 -0.9 -1.2 -1.3 -1.3
Automatic debt dynamics 1/ -0.9 3.0 -3.1 5.3 -3.3 0.7 0.3 -0.6 -1.2 -0.8 -1.0
Contribution from nominal interest rate 0.6 0.7 0.6 0.9 1.2 0.9 1.0 0.6 0.3 0.7 0.5
Contribution from real GDP growth -0.7 0.7 -0.7 0.6 -0.9 -0.2 -0.7 -1.2 -1.5 -1.5 -1.5
Contribution from price and exchange rate changes 2/ -0.8 1.6 -3.0 3.9 -3.6 ... ... ... ... ... ...
Residual, incl. change in gross foreign assets (2-3) 3/ -0.8 -0.4 0.3 -0.3 4.5 11.8 -0.3 -1.2 -0.8 -0.1 -0.1
External debt-to-exports ratio (in percent) 186.4 208.2 255.5 268.1 324.6 360.2 355.6 355.0 348.4 338.2 331.5
Gross external financing need (in billions of US dollars) 4/ 85.8 82.6 81.7 104.5 96.8 139.7 124.6 113.8 112.5 138.3 143.3
in percent of GDP 14.0 14.7 12.7 18.9 15.2 10-Year 10-Year 25.1 21.6 18.4 16.9 19.9 19.5
Scenario with key variables at their historical averages 5/ 51.3 47.7 44.6 42.0 38.9 36.4 -3.8
Historical Standard
Key Macroeconomic Assumptions Underlying Baseline Average Deviation
Real GDP growth (in percent) 2.4 -2.5 2.7 -1.8 2.9 1.7 4.6 0.4 1.5 2.5 3.1 3.1 3.2
GDP deflator in US dollars (change in percent) 3.0 -5.5 11.0 -12.2 11.9 7.1 10.9 -13.0 2.0 4.4 4.5 1.6 2.5
Nominal external interest rate (in percent) 2.3 2.4 2.2 2.7 4.1 2.5 0.6 2.0 2.1 1.2 0.6 1.4 1.1
Growth of exports (US dollar terms, in percent) -5.0 -8.7 -14.4 1.0 2.7 2.0 15.3 9.2 7.5 5.9 7.1 6.3 6.1
Growth of imports (US dollar terms, in percent) 9.6 -11.8 -8.4 -7.1 19.6 6.7 24.1 2.6 3.1 6.7 7.2 6.0 5.7
Current account balance, excluding interest payments -1.5 -0.9 -2.2 -1.8 -3.6 -0.4 2.1 -2.7 -2.2 -2.1 -1.9 -1.4 -1.6
Net non-debt creating capital inflows 1.5 0.6 1.7 0.4 2.1 1.6 0.7 0.9 0.9 0.9 1.2 1.3 1.3
Source: Fund staff calculations and estimates.

1/ Derived as [r - g - r(1+g) + ea(1+r)]/(1+g+r+gr) times previous period debt stock, with r = nominal effective interest rate on external debt; r = change in domestic GDP deflator in US dollar terms, g = real GDP growth rate,
e = nominal appreciation (increase in dollar value of domestic currency), and a = share of domestic-currency denominated debt in total external debt.
2/ The contribution from price and exchange rate changes is defined as [-r(1+g) + ea(1+r)]/(1+g+r+gr) times previous period debt stock. r increases with an appreciating domestic currency (e > 0) and rising inflation (based on GDP deflator).
3/ For projection, line includes the impact of price and exchange rate changes.
4/ Defined as current account deficit, plus amortization on medium- and long-term debt, plus short-term debt at end of previous period.
5/ The key variables include real GDP growth; nominal interest rate; dollar deflator growth; and both non-interest current account and non-debt inflows in percent of GDP.
6/ Long-run, constant balance that stabilizes the debt ratio assuming that key variables (real GDP growth, nominal interest rate, dollar deflator growth, and non-debt inflows in percent of GDP) remain at their levels
of the last projection year.
ARGENTINA
49
ARGENTINA
Argentina: External Debt Sustainability: Bound Tests 1/ 2/

(External debt in percent of GDP)
Baseline and historical scenarios Interest rate shock

100 50 100
45 90 Baseline: 1.3
90
Gross financing need 40 Scenario: 1.6
80 under baseline 80
35 Historical: 2.5
(right scale)
70 30 70
i-rate
60 25 60
Baseline shock
49 20 50
50 50
Historical Baseline
15
40 40 49
10
36
30 5 30
20 0 20
2013 2015 2017 2019 2021 2023 2013 2015 2017 2019 2021 2023
Growth shock Non-interest current account shock

100 100
90 Baseline: 2.7 90 Baseline: -1.8

Scenario: 0.3 Scenario: -2.9
80 80
Historical: 1.7 Historical: -0.4
70 70
Growth
60 55 60 54
shock CA shock
50 50
Baseline 49 Baseline 49
40 40
30 30
20 20
2013 2015 2017 2019 2021 2023 2013 2015 2017 2019 2021 2023
Combined shock 3/ Real depreciation shock 4/

100 100
90 90
30 %
80 80 depreciation
72
70 70
Combined
60 shock 55 60
50 50
Baseline 49 Baseline 49
40 40
30 30
20 20
2013 2015 2017 2019 2021 2023 2013 2015 2017 2019 2021 2023
Source: Fund staff calculations and estimates.

1/ Shaded areas represent actual data. Individual shocks are permanent one-half standard deviation shocks. Figures in the
boxes represent average projections for the respective variables in the baseline and scenario being presented. Ten-year
historical average for the variable is also shown.
2/ For historical scenarios, the historical averages are calculated over the ten-year period, and the information is used to project
debt dynamics five years ahead.
3/ Permanent 1/4 standard deviation shocks applied to real interest rate, growth rate, and current account balance.
4/ One-time real depreciation of 30 percent occurs in 2018.

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Annex I. Public Debt Sustainability Analysis
Debt vulnerabilities have become evident following the tightening of global monetary
conditions and a series of domestic policy changes. Federal government debt is projected
to rise to 65 percent in 2018 before gradually declining again. Risks to debt stabilization
are contained as the increase in the debt to GDP ratio in 2018, as a result of the peso
depreciation, is expected to be more than offset after 2019 by a lower primary fiscal
deficit, which is assumed to turn into a surplus beginning in 2021. However, high gross
financing needs, a high share of foreign currency debt, high external financing needs, and
potential contingent liabilities pose important risks. On balance, under the program
baseline, staff assesses debt to be sustainable but not with high probability. In the adverse
scenario, federal debt would be about 4 percent of GDP higher than in the baseline by
end-2021. US$50 billion of access under the program would be needed to ensure the
program remains fully financed, and in that scenario, the DSA shows Argentina’s debt to
be sustainable, albeit not with a high probability.
A. Background
At end-2017, gross federal government debt, which includes intra-public-sector debt, was AR$6,025
billion or 57 percent of GDP, which represents an increase of 3.7 percent of GDP relative to end-
2016. This concept includes guarantees issued by the Federal Government (Letras en garantia,
Garantia a las provincias and Avales). It excludes debt issued by the provinces (see Box 1) and the
BCRA as well as GDP-warrants.1
 Recent developments. Since the previous DSA, EMBI

two series of bonds have been placed: three 550
(Basis points)
euro-denominated bonds for a total equivalent 500

EMBI LAC
EMBI ARG
of US$2.75 billion in November 2017, and three 450
dollar-denominated bonds for a total equivalent 400
of US$ 9 billion issued on January 4, 2018. There 350
have also been two repo operations for US$ 1 300
billion each: one with HSBC at end-March 2018
1/1/18
4/9/18
5/7/18
6/4/18
1/15/18
1/29/18
2/12/18
2/26/18
3/12/18
3/26/18
4/23/18
5/21/18
and the other with Credit Suisse at end-April

Source: Bloomberg.
2018. The upward revision at end-2017 of the
inflation targets and a tax on capital gains for non-residents which came into effect at end-April
2018 led to pressures on the exchange rate. Capital outflows accelerated in March–April 2018,
forcing the central bank to increase interest rates sharply. Following these developments,
sovereign spreads have increased by about 120 basis points from mid-April until end-May. In
1
GDP warrants (Valores Negociables Vinculadas al PBI) are excluded since they are contingent liabilities whose
payments depend on the level and growth rate of real effective GDP (subject to a maximum payment restriction).
There have been no payments associated with these instruments since 2011.

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response, the government changed its plans for issuing more international bonds, so it is now
reliant only on domestic market financing, and on IFIs and official bilateral support.
 Currency composition. Nearly 70 percent of Argentina’s debt stock is denominated-in or

linked-to a foreign currency, mainly the U.S. dollar. Of the peso-denominated debt, just under
one-quarter is linked to inflation.
 Debt holders. The federal debt held by other Gross Federal Debt by Creditor, 2017

public sector entities continues to represent a Domestic private sector
Non‐banks
9%
large share of the total stock (48 percent by the
Banks
6%
end of 2017). Of this total, the BCRA, which IFIs and official BCRA
holds (effectively) zero-interest bonds, accounts bilateral 29%

9%
for 29 percent, ANSES for 11 percent, and other External sector
Public sector
public sector institutions (excluding Banco Bond markets
29% ANSES
Nación) the remaining 7 percent. The other 11%
52 percent of the total stock of debt is held by Other intra‐

public sector
the private sector (including both domestic and 7%
external) and by International Financial

Institutions and other official bilateral creditors.
Box 1. Provinces
In 2017, the provinces are projected to have run

an overall fiscal deficit of 0.8 percent of GDP. As
the federal government, they also have been
active in issuing foreign currency debt on
international capital markets. External debt
issuance was US$6.7 billion in 2017, concentrated
in the province of Buenos Aires and, to a lesser
extent, Cordoba. The only provincial issuance in
2018 has been a domestic market public issue by
the Province of Buenos Aires in April. Total debt of
all provinces at end-2017 is projected to have
been around AR$ 542 billion, or 5.3 percent of
GDP, of which around a third held by the federal government.
Going forward, the overall fiscal deficit is expected to decline somewhat ending in 2022 at 0.4
percent of GDP. This places provincial debt on an upward trajectory to 7.3 percent of GDP (and 55
percent of revenues) by 2022. While this is still below historical highs, risks remain, including:
 60 percent of debt is denominated in foreign currency, although this ranges significantly

between 0 and 90 percent. A sudden adjustment of the overvalued exchange rate would raise
the debt level, jeopardize continued full market access, and force a faster fiscal consolidation
(and/or a bail-out by the federal government). An additional 20 percent depreciation in 2018
would increase debt by 0.5 pts of GDP (to 6.1 percent of GDP).

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 The overall debt level of provinces masks significant heterogeneity within the group. The ratio
of debt to total revenues ranges from 1 to 70 percent, and those provinces that have the
greatest debt to revenue ratios tend also to have the largest absolute debt stock, suggesting
potential contingent liability risks for the federal government.
Debt Indicators by Province
1.8 Debt to
1.6 national
GDP
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
0 20 40 60 80
Debt/ revenue ratio
A. Baseline Scenario
Debt is expected to increase to 65 percent of GDP in 2018, largely as a result of the peso
depreciation, and to decline gradually afterwards towards 53 percent of GDP by 2023. Gross
financing needs (GFN) will remain high, but they are expected to remain below the 15 percent high-
risk threshold for emerging markets under the baseline. This projection is based on the following
assumptions:
 Growth and inflation. Growth in 2018 is expected to decelerate to 0.4 percent, and then to
rebound to 1.5 percent in 2019 and to accelerate gradually to 3.2 percent by 2023. Inflation
is expected to continue to erode the real value of long-maturity, peso-denominated debt,
supporting debt dynamics.
 Primary deficit. The fiscal consolidation throughout the period will contribute to contain
the accumulation of debt going forward. This contrasts with the 2017 Article IV DSA, which
had a more gradual decline of the primary fiscal balance (see below).
 Exchange rate. The significant real peso depreciation in 2018 is expected to worsen debt
dynamics, although it will contribute to correct the REER overvaluation estimated as of end-
2017.
 Financing assumptions. Continued rollover of intra-public sector financing is assumed,

although statutory advances from the BCRA now are assumed to be zero starting in 2018.
No further international bond issuances are expected in 2018, although they are assumed to
resume in 2019. Domestic creditors, in particular the non-banking sector, will provide part of

ARGENTINA
the remaining financing. The average effective interest rate on total debt is expected to
increase gradually from 7.1 percent in 2018 to almost 8 percent in 2021.
Compared to the December 2017 Article IV DSA, both gross financing needs and effective interest
rates have dropped. This is due to several changes:
 While interest rate assumptions for 2018 and 2019 are higher in the current baseline, these
are assumed to fall in the medium term (versus in the 2017 AIV where they remained
broadly constant), as reforms succeed in improving Argentina’s risk premium and generating
a shift towards longer term debt. The calculated effective interest rate is also lowered due to
a higher debt stock denominator.
 The more sizable and accelerated fiscal consolidation under the current baseline, directly
lowers financing needs in the early projection years, generating a virtuous cycle.
 The current baseline, in essence, assumes the resolution of the vulnerabilities identified in
the Article IV consultation (e.g. sizable twin deficits, high inflation), thus generating more
benign financing needs, debt costs, and placing debt on a clear downward trajectory.
Box 2. Adverse Scenario

The Debt Sustainability Analysis was also performed under the assumptions of the Adverse
Scenario described in ¶39 of the Staff Report, in which there is a tightening of global financial
conditions that leads to: (i) lower rollover rates on Argentine debt by both residents and
nonresidents; (ii) more depreciated paths for the real and nominal exchange rates; (iii) higher
paths for nominal and real interest rates; (iv) a deeper recession in 2018, a more protracted
recovery into 2020 and lower potential growth; (v) a need to find an additional 1 percent of GDP
in measures to keep the primary deficit from rising above 2 percent of GDP in 2019 and 1 percent
of GDP in 2020; and (vi) the full amount of the SBA is drawn and used for budget support.
As can be seen from the results below for this DSA for the Adverse Scenario, federal debt would
be about 4 percent of GDP higher than in the baseline by end-2021. Gross fiscal financing needs
would also be more elevated throughout the projection period. Effective interest rates, however,
are lower than in the baseline. This is so despite the fact that domestic interest payments are
sizably higher (due to higher reliance on ST debt). In this scenario, US$50 billion of access under
the program would be needed to ensure the program remains fully financed and debt remains
sustainable, but not with a high probability.

ARGENTINA
Argentina Public Sector Debt Sustainability Analysis (DSA) - Adverse Scenario

(in percent of GDP unless otherwise indicated)
1/
Debt, Economic and Market Indicators
Actual Projections As of May 09, 2018
2/
2007-2015 2016 2017 2018 2019 2020 2021 2022 2023 Sovereign Spreads
Nominal gross public debt 47.4 53.3 56.8 68.6 65.4 60.0 59.8 59.0 57.9 EMBIG (bp) 3/ 491
Public gross financing needs 9.5 12.5 13.1 13.1 11.3 11.2 11.3 14.8 14.2 5Y CDS (bp) 348
Real GDP growth (in percent) 2.8 -1.8 2.9 -1.3 0.0 1.0 1.2 1.7 2.3 Ratings Foreign Local
Inflation (GDP deflator, in percent) 23.5 40.1 25.3 26.6 24.1 16.6 11.0 8.5 6.9 Moody's B3 B3
Nominal GDP growth (in percent) 26.8 37.5 28.9 24.8 24.3 17.7 12.3 10.4 9.3 S&Ps B B
4/
Effective interest rate (in percent) 4.5 4.0 8.3 8.4 7.2 6.4 6.1 5.1 6.0 Fitch B B
Heat Map
Debt level 1/ Real GDP Primary Balance Real Interest Exchange Rate Contingent
Growth Shock Shock Rate Shock Shock Liability shock
Real GDP Primary Balance Real Interest Exchange Rate Contingent

Gross financing needs 2/
Growth Shock Shock Rate Shock Shock Liability Shock
External Change in the Public Debt Foreign

Market
Debt profile 3/ Financing Share of Short- Held by Non- Currency
Perception
Requirements Term Debt Residents Debt
B. Realism of the assumptions
 Growth and inflation. The track record shows that the median forecast error for real GDP
growth has been in the lowest quartile of the distribution, while the median forecast error for
inflation suggest somewhat pessimistic bias. The assumption in the baseline that growth in 2018
will decelerate to 0.4 percent, and then to rebound to 1.5 percent in 2019 and to accelerate
gradually to 3.2 percent by 2023 could be seen as optimistic. Nevertheless, as discussed above,
the program is robust to the stress-scenario in which growth rate would be lower in 2018 and
2019 by around 1 percent in each year than that in the program.
 Primary deficit. The track record shows that the median forecast error for the primary balance
has been on the optimistic side. The tool for assessing the realism of projected fiscal adjustment
shows that it is ambitious compared with the distribution of observed adjustments. In particular,
the projected adjustment places Argentina in the top 13 percent of the distribution of
consolidations achieved by program countries.
C. Shocks and Stress Tests
Solvency risks
 Given the high share of foreign currency denominated debt, a shock to the exchange rate is a
major vulnerability. The standard DSA stress test (50 percent real depreciation with 0.25 pass-
through) shows that debt could jump to 81 percent of GDP in such a scenario, above the high-

ARGENTINA
risk threshold. Debt is also vulnerable to a growth shock, which under the stress test could raise
debt to 70 percent of GDP. Given the relatively long debt maturity profile, a shock to interest
rates is not a major risk, although it is important to keep in mind that the concept of debt
considered here does not include BCRA debt, which is mostly short-term.
 Fiscal consolidation is critical to stabilizing the debt level. If the primary balance were to remain
unchanged at its 2018 level (–2.7 percent of GDP), debt would follow an upward trajectory,
exceeding 70 percent of GDP by 2023. A ‘combined macro-fiscal’ shock would cause debt to rise
to nearly 103 percent of GDP, likely triggering a crisis.2
Liquidity risks
 A combined macro-fiscal shock will lead to GFN of 23 percent of GDP. In such a scenario, it may
not be possible to finance this through market access, triggering the need for steep fiscal
consolidation.
 Liquidity risks are somewhat mitigated by the significant share of debt held by public sector
entities. However, while the public sector holds around half of the federal debt stock, the
contribution of this debt to the medium-term GFN profile is relatively small. Even if these
principal payments are fully rolled over, as assumed, a significant GFN remain.
D. Overall Assessment
59. Debt is expected to peak at end-2018 and fall steadily thereafter. The fiscal adjustment,
economic recovery, and lower real interest rates (as central bank credibility is established) will all
work to place public debt-to-GDP on a steady downward trajectory from 2019 onwards. After
peaking this year at 65 percent of GDP, debt would fall under the planned fiscal consolidation to
about 56 percent of GDP by the end of 2021. Gross financing needs remain elevated for much of
the program period but are not projected to breach the 15 percent of GDP risk threshold in the
baseline throughout the medium term.
60. Nonetheless, there are still risks to debt sustainability. The most evident near-term risks
are linked to:
 The size of the gross financing needs under a stressed scenario;
 The large (and potentially rising) share of foreign currency debt (which makes Argentina’s debt
dynamics susceptible to a sustained correction in the real exchange rate);
2
This involves: (i) a one-standard deviation shock to growth, with the corresponding automatic stabilizers and lower
inflation; (ii) a 50 percent real depreciation, with 0.25 pass-through to inflation; and (iii) 200bps shock to interest
rates.

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 The large external financing needs of the economy, which in past emerging market crises have
shown to be a strong predictor of a debt crisis;
 The fact that the proposed fiscal consolidation is ambitious relative to similar country situations
(i.e., in the top 13 percent of the distribution of consolidations achieved by program countries);
 The DSA covers only federal government debt and so could understate the sustainability of
general government debt. However, most provinces are running close to a balanced budget and
provincial debt at end-2017 was projected to be around 6 percent of GDP;
 The national government faces contingent liabilities from needing to recapitalize the central
bank, from loss-making publicly-owned corporations, and from unfunded pensions.
These risks are, however, mitigated by the high share of federal government debt that is held by
other public-sector entities and the relatively long maturity of dollar-denominated debt issued on
international markets (less than one-fifth of the government’s US$-denominated debt held outside
the Argentine public sector will mature by end-2020).
61. Taking all these considerations into account, staff assesses that, under this baseline,
the federal debt is sustainable but not with a high probability.

58
Table. Argentina - Federal Government
ARGENTINA
Gross Financing Needs and Sources (US$mn, as of May 31, 2018)
2018 2019
2018 2019 2020 2021
Primary Balance 3,094 3,999 5,054 631 2,441 1,951 2,466 (1,138) (5,552)
Interest 2,817 2,642 6,011 2,353 4,888 1,917 4,413 19,721 24,349
FX 1,538 1,117 3,844 1,366 3,154 1,116 2,764 12,207 15,072
of which: to non-public sector 756 956 2,829 1,203 2,313 1,038 1,892 9,369 11,567
AR$ 1,279 1,525 2,167 987 1,734 801 1,648 7,514 9,277
of which: to non-public sector 306 507 1,225 452 1,197 429 1,193 4,754 5,869
Amortizations 6,359 15,396 29,789 17,769 20,335 9,036 15,918 47,979 39,651
FX 2,774 6,799 11,870 7,776 13,798 6,527 5,979 25,930 21,430
of which: to non-public sector 2,333 6,524 8,539 5,629 13,694 6,480 5,934 24,149 19,957
AR$ 3,586 8,597 17,920 9,993 6,537 2,509 9,939 22,049 18,221
of which: to non-public sector 173 3,775 1,591 1,825 84 99 100 1,604 1,326
Reducing liabilities with the BCRA 5,000 1,933 314 5,205 1,037 3,820 1,481 6,300 -
Total Needs 17,270 23,970 41,168 82,408 25,958 28,701 16,725 24,278 95,661 72,862 58,448
Deposit drawdown 5,000 2,237 - - - - - - -
IFIs 251 754 754 1,200 1,200 1,200 1,200 1,300 2,400
Intra-Public Sector Rollovers 4,128 5,459 21,055 11,516 7,320 2,743 11,035 21,500 15,500
Private Sector Rollovers 1,347 7,941 7,452 6,930 10,047 6,075 5,580 25,542 26,581
of which: FX 1,344 4,544 6,020 5,105 9,963 5,976 5,480 23,000 23,000
Public Sector New Borrowing 1,500 5,277 11,753 16,750 5,013 5,250 2,603 24,520 13,967
of which: External - 3,000 753 12,000 - - - 10,500 6,000
Total Sources 12,226 21,668 41,014 74,908 36,396 23,581 15,268 20,417 95,661 72,862 58,448
Gap 5,044 2,302 154 7,500 (10,438) 5,120 1,457 3,861 0 0 0
Memo Items:
Interest to Non-residents 743 1,024 2,838 1,156 2,454 1,025 2,157 7,889 4,870
FX 529 669 1,980 840 1,614 724 1,321
AR$ 214 355 858 317 839 301 837
Amortization to Non-Residents 7,276 10,605 8,199 3,033 8,503 3,443 3,369 8,156 10,706
FX 1,907 5,332 6,979 2,624 6,384 3,021 2,766
AR$ 64 1,407 593 217 - - -
LEBACs 5,305 3,866 627 191 2,119 422 603 632 -
ARGENTINA
Argentina Public DSA Risk Assessment

Heat Map
Debt level 1/ Real GDP Primary Balance Real Interest Exchange Rate Contingent
Growth Shock Shock Rate Shock Shock Liability shock
Real GDP Primary Balance Real Interest Exchange Rate Contingent

Gross financing needs 2/
Growth Shock Shock Rate Shock Shock Liability Shock
External Change in the Public Debt Foreign

Market
Debt profile 3/ Financing Share of Short- Held by Non- Currency
Perception
Requirements Term Debt Residents Debt
Evolution of Predictive Densities of Gross Nominal Public Debt

(in percent of GDP)
Baseline Percentiles: 10th-25th 25th-75th 75th-90th
Symmetric Distribution Restricted (Asymmetric) Distribution

80 80
70 70
60 60
50 50
40 40
30 30
Restrictions on upside shocks:
20 20 no restriction on the growth rate shock
no restriction on the interest rate shock
10 10 0 is the max positive pb shock (percent GDP)
no restriction on the exchange rate shock
0 0
2016 2017 2018 2019 2020 2021 2022 2023 2016 2017 2018 2019 2020 2021 2022 2023
Debt Profile Vulnerabilities

(Indicators vis-à-vis risk assessment benchmarks, in 2017)
Argentina Lower early warning Upper early warning
3%
68%
415 15%
1 45 39% 60
600 bp 15
200 5 0.5 15 20
1 2 1 2
Annual
1
Change2 in 1 2 1 2
External Financing Public Debt Held by Public Debt in

EMBIG Short-Term Public
Requirement Non-Residents Foreign Currency
Debt
(in basis points) 4/ (in percent of GDP) 5/ (in percent of total) (in percent of total) (in percent of total)
Source: IMF staff.

1/ The cell is highlighted in green if debt burden benchmark of 70% is not exceeded under the specific shock or baseline, yellow if exceeded under specific shock but not baseline,
red if benchmark is exceeded under baseline, white if stress test is not relevant.
2/ The cell is highlighted in green if gross financing needs benchmark of 15% is not exceeded under the specific shock or baseline, yellow if exceeded under specific shock but not
baseline, red if benchmark is exceeded under baseline, white if stress test is not relevant.
3/ The cell is highlighted in green if country value is less than the lower risk-assessment benchmark, red if country value exceeds the upper risk-assessment benchmark, yellow if
country value is between the lower and upper risk-assessment benchmarks. If data are unavailable or indicator is not relevant, cell is white.
Lower and upper risk-assessment benchmarks are:
200 and 600 basis points for bond spreads; 5 and 15 percent of GDP for external financing requirement; 0.5 and 1 percent for change in the share of short-term debt; 15 and 45
percent for the public debt held by non-residents; and 20 and 60 percent for the share of foreign-currency denominated debt.
4/ EMBIG, an average over the last 3 months, 08-Feb-18 through 09-May-18.
5/ External financing requirement is defined as the sum of current account deficit, amortization of medium and long-term total external debt, and short-term total external debt at
the end of previous period.

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Argentina Public Sector Debt Sustainability Analysis (DSA) - Baseline Scenario

(in percent of GDP unless otherwise indicated)
Debt, Economic and Market Indicators 1/

Actual Projections As of May 09, 2018
2/
2007-2015 2016 2017 2018 2019 2020 2021 2022 2023 Sovereign Spreads
Nominal gross public debt 47.4 53.3 57.1 64.5 60.9 57.4 55.8 54.1 53.0 EMBIG (bp) 3/ 491
Public gross financing needs 9.5 12.5 13.1 13.0 10.7 9.6 8.7 10.3 10.8 5Y CDS (bp) 348
Real GDP growth (in percent) 2.8 -1.8 2.9 0.4 1.5 2.5 3.1 3.1 3.2 Ratings Foreign Local
Inflation (GDP deflator, in percent) 23.5 40.1 25.3 24.9 19.6 13.8 9.9 5.9 5.1 Moody's B3 B3
Nominal GDP growth (in percent) 26.8 37.5 28.9 25.4 21.4 16.7 13.2 9.3 8.4 S&Ps B B
4/
Effective interest rate (in percent) 4.5 4.0 8.3 7.1 7.0 7.5 7.9 7.8 7.9 Fitch B B
Contribution to Changes in Public Debt

Actual Projections
2007-2015 2016 2017 2018 2019 2020 2021 2022 2023 cumulative debt-stabilizing
Change in gross public sector debt -1.6 -1.8 3.7 7.5 -3.6 -3.5 -1.6 -1.7 -1.0 -4.0 primary
9/
Identified debt-creating flows -3.3 -1.9 0.1 -5.6 -6.3 -4.8 -3.2 -1.7 -1.4 -23.0 balance
Primary deficit 0.9 4.2 3.8 2.7 1.3 0.0 -0.5 -0.9 -1.2 1.4 1.0
Primary (noninterest) revenue and grants 25.3 26.6 26.1 26.5 27.2 27.6 27.9 27.9 27.9 165.1
Primary (noninterest) expenditure 26.2 30.8 29.9 29.2 28.5 27.6 27.4 27.0 26.7 166.5
5/
Automatic debt dynamics -4.2 -6.1 -3.7 -8.3 -7.6 -4.8 -2.7 -0.7 -0.2 -24.4
6/
Interest rate/growth differential -8.4 -11.8 -9.1 -8.3 -7.6 -4.8 -2.7 -0.7 -0.2 -24.4
Of which: real interest rate -7.3 -12.5 -7.9 -8.1 -6.8 -3.5 -1.2 0.9 1.4 -17.4
Of which: real GDP growth -1.2 0.7 -1.2 -0.2 -0.8 -1.3 -1.6 -1.6 -1.6 -7.0
7/
Exchange rate depreciation 4.2 5.8 5.4 … … … … … … …
Other identified debt-creating flows 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Government and Public Sector Finance: G0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Contingent liabilities 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Please specify (2) (e.g., ESM and Euroare 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
8/
Residual, including asset changes 1.7 0.1 3.7 13.1 2.7 1.2 1.6 -0.1 0.4 18.9
25 25
Debt-Creating Flows projection
20
20
(in percent of GDP)
15
15
10
10
5
5 0
0 -5
-10
-5
-15
-10
-20
-15 -25
-20 -30
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 cumulative
Primary deficit Real GDP growth Real interest rate Exchange rate depreciation
Other debt-creating flows Residual Change in gross public sector debt
Source: IMF staff.

1/ Public sector is defined as central government.
2/ Based on available data.
3/ EMBIG.
4/ Defined as interest payments divided by debt stock (excluding guarantees) at the end of previous year.
5/ Derived as [(r - π(1+g) - g + ae(1+r)]/(1+g+π+gπ)) times previous period debt ratio, with r = interest rate; π = growth rate of GDP deflator; g = real GDP growth rate;
a = share of foreign-currency denominated debt; and e = nominal exchange rate depreciation (measured by increase in local currency value of U.S. dollar).
6/ The real interest rate contribution is derived from the numerator in footnote 5 as r - π (1+g) and the real growth contribution as -g.
7/ The exchange rate contribution is derived from the numerator in footnote 5 as ae(1+r).
8/ Includes asset changes and interest revenues (if any). For projections, includes exchange rate changes during the projection period.
9/ Assumes that key variables (real GDP growth, real interest rate, and other identified debt-creating flows) remain at the level of the last projection year.

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Argentina Public DSA - Composition of Public Debt and Alternative Scenarios
Composition of Public Debt

By Maturity By Currency
(in percent of GDP) (in percent of GDP)
70 70
Medium and long-term Local currency-denominated
60 Short-term 60 Foreign currency-denominated
50 50
40 40
30 30
projection
20 projection 20
10 10
0 0
2007 2009 2011 2013 2015 2017 2019 2021 2023 2007 2009 2011 2013 2015 2017 2019 2021 2023
Alternative Scenarios
Baseline Historical Constant Primary Balance
Gross Nominal Public Debt Public Gross Financing Needs

(in percent of GDP) (in percent of GDP)
80 25
70
20
60
50
15
40
30 10
20
5
10
projection projection
0 0
Net debt (in
2016percent
2017
of GDP)
2018 2019 2020 2021 2022 2023 2016 2017 2018 2019 2020 2021 2022 2023
Underlying Assumptions
(in percent)
Baseline Scenario 2018 2019 2020 2021 2022 2023 Historical Scenario 2018 2019 2020 2021 2022 2023
Real GDP growth 0.4 1.5 2.5 3.1 3.1 3.2 Real GDP growth 0.4 1.7 1.7 1.7 1.7 1.7
Inflation 24.9 19.6 13.8 9.9 5.9 5.1 Inflation 24.9 19.6 13.8 9.9 5.9 5.1
Primary Balance -2.7 -1.3 0.0 0.5 0.9 1.2 Primary Balance -2.7 -1.8 -1.8 -1.8 -1.8 -1.8
Effective interest rate 7.1 7.0 7.5 7.9 7.8 7.9 Effective interest rate 7.1 7.0 5.9 5.3 4.4 3.3
Constant Primary Balance Scenario
Real GDP growth 0.4 1.5 2.5 3.1 3.1 3.2
Inflation 24.9 19.6 13.8 9.9 5.9 5.1
Primary Balance -2.7 -2.7 -2.7 -2.7 -2.7 -2.7
Effective interest rate 7.1 7.0 7.7 8.3 8.3 8.4
Source: IMF staff.

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Argentina Public DSA - Stress Tests
Macro-Fiscal Stress Tests
Baseline Primary Balance Shock Real Interest Rate Shock

Real GDP Growth Shock Real Exchange Rate Shock
Gross Nominal Public Debt Gross Nominal Public Debt Public Gross Financing Needs
(in percent of GDP) (in percent of Revenue) (in percent of GDP)
90 300 18
80 16
250
70 14
60 200 12
50 10
150
40 8
30 100 6
20 4
50
10 2
0 0 0
2018 2019 2020 2021 2022 2023 2018 2019 2020 2021 2022 2023 2018 2019 2020 2021 2022 2023
Additional Stress Tests

Baseline Combined Macro-Fiscal Shock
Gross Nominal Public Debt Gross Nominal Public Debt Public Gross Financing Needs
(in percent of GDP) (in percent of Revenue) (in percent of GDP)
120 400 25
350
100
20
300
80
250 15
60 200
150 10
40
100
5
20
50
0 0 0
2018 2019 2020 2021 2022 2023 2018 2019 2020 2021 2022 2023 2018 2019 2020 2021 2022 2023
Underlying Assumptions
(in percent)
Primary Balance Shock 2018 2019 2020 2021 2022 2023 Real GDP Growth Shock 2018 2019 2020 2021 2022 2023
Real GDP growth 0.4 1.5 2.5 3.1 3.1 3.2 Real GDP growth 0.4 -3.2 -2.2 3.1 3.1 3.2
Primary balance -2.7 -2.3 -1.0 0.5 0.9 1.2 Primary balance -2.7 -3.0 -3.3 0.5 0.9 1.2
Real Interest Rate Shock Real Exchange Rate Shock
Real GDP growth 0.4 1.5 2.5 3.1 3.1 3.2 Real GDP growth 0.4 1.5 2.5 3.1 3.1 3.2
Primary balance -2.7 -1.3 0.0 0.5 0.9 1.2 Primary balance -2.7 -1.3 0.0 0.5 0.9 1.2
Combined Shock
Real GDP growth 0.4 -3.2 -2.2 3.1 3.1 3.2
Inflation 24.9 18.4 12.7 9.9 5.9 5.1
Primary balance -2.7 -3.0 -3.3 0.5 0.9 1.2
Effective interest rate 7.1 9.4 7.3 8.1 8.3 8.7
Source: IMF staff.

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Appendix I. Letter of Intent
June 12, 2018
Madame Christine Lagarde

Managing Director
Washington, D.C. 20431
United States of America
Dear Madame Lagarde:
The attached Memorandum of Economic and Financial Policies (MEFP) describes the economic
objectives and policies of the Government of Argentina for 2018 and beyond. Also attached is a
Technical Memorandum of Understanding that sets out the specific objectives that we are
committed to achieving under the IMF arrangement in support of our economic plan.
The Argentine government requests the IMF’s support for this policy program. It is a plan that
has been designed by the Argentine government in a way that we judge best fits our current
political, economic and social situation.
As part of that support, we are formally requesting an IMF Stand-By Arrangement for a period of
36 months, in the amount of SDR 35,379 million (equivalent to around US$ 50 billion, or 1,110
percent of Argentina’s quota with the IMF). We plan to draw the first tranche (US$ 15 billion)
upon approval of the arrangement, half of which will be used as budget support, while treating
the remaining of the arrangement as precautionary.
We consider that the plan that we have designed is strong and will help build confidence, reduce
uncertainties and strengthen Argentina’s economic prospects.
Importantly, we are committed to ensuring that the burden of the needed recalibration of the
fiscal policy is shared fairly and that the most vulnerable segments of Argentina’s population are
fully protected. Under our program we intend to protect our spending on social assistance and,
in the unlikely event that social conditions deteriorate, we are committed to identifying
additional resources to increase the funding of our most effective social assistance programs.
Consistent with the priorities of President Macri’s administration, included in our G20 agenda, we
also intend to use this opportunity to take important steps to address long-standing gender
inequities that are embedded in the Argentine economic system. One of our goals for this
program is to ensure that women are treated equitably and are afforded the economic
opportunities that they are entitled to. We especially seek your personal backing in this matter.
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In sum, we ask that the IMF stands with Argentina through this more challenging international
environment. We view the objectives of the plan described in the attachments as mileposts that
should be used in the design of the requested Stand-By Arrangement.
To demonstrate our commitment to this plan, on June 7 we announced our intention to

accelerate the convergence to a primary fiscal balance and to lower inflation within a more
consistent and institutionally sound monetary policy framework.
We believe that these policies and those set forth in the attached MEFP are adequate to achieve
the macroeconomic and financial objectives of the program. But we will take any additional
measures that may be appropriate for this purpose. We will consult with the IMF on the adoption
of these measures, and in advance of revisions to the policies contained in the MEFP, in
accordance with the IMF’s policies on such consultation.
We remain, of course, committed to maintaining the usual close policy dialogue with IMF staff
and to providing IMF staff with the data and information it requests for the purpose of
monitoring program implementation. Reaffirming our commitment to transparency, we consent
to the IMF’s publication of this letter, the MEFP, the Technical Memorandum of Understanding,
and the accompanying Executive Board documents.
We trust that we can count on your support.
Yours sincerely,
/s/ /s/
Nicolas Dujovne Federico Sturzenegger
Minister of the Treasury President, Central Bank of Argentina
Attachments (2)

Attachment I. Memorandum of Economic and Financial
Policies
Argentina’s financial markets came under sudden pressure in April, an unfortunate confluence
of a range of factors. A severe drought led to a sharp decline in agricultural production and
export revenue, world energy prices increased, and global financial conditions tightened
through an appreciation of the U.S. dollar and an upward shift in the U.S. yield curve.
These unexpected changes interacted with the known vulnerabilities that our policy path had
embedded. Our decision to gradually reduced the macroeconomic imbalances inherited from
the previous administration implied significant fiscal and external financing requirements.
These forces have manifested themselves in the form of pressure on our currency, market
anxiety about the roll-over of short-term central bank paper, and an increase in our sovereign
risk premium. Even though the economy was showing healthy growth rates at the time of
seeking the assistance of the IMF, these events convinced us that this assistance was needed
to moderate the impact of the increased international financial volatility on our economy.
The message we have taken from these unfortunate circumstances is the need to deepen and
accelerate the economic reforms that our administration has been committed to since taking
office in December 2015.
Our objectives are:
 To fully restore market confidence through macroeconomic policies that lessen the federal
government’s financing needs and put our public debt on a firm downward path.
 To strengthen the central bank’s institutional and inflation targeting framework by

reinforcing its autonomy and setting a realistic path for inflation that takes into account
the implications of the recent market volatility but, nonetheless, seeks to bring down
inflation to single digits by the end of 2021.
 To lessen the strains on our balance of payments by allowing our exchange rate to operate
flexibly as a shock absorber, increasing our international reserves, lowering our current
account deficit, and reducing our external financing needs.

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 To protect Argentina’s most vulnerable citizens from the burden of this needed policy
recalibration.
Ultimately, these efforts will raise our economic dynamism, create new jobs, encourage
investment in our economy, reduce poverty, improve social cohesion, and raise the living
standards for all Argentines.
Further, we are committed to transparency and integrity and will continue sharing fully with
the Argentine public all the details of our economic plan. This has been a fundamental
principle of this administration. Our commitment to this approach is evidenced by the
announcement of the full details of our policy proposals on June 7 and the publication of this
document.
A. Fiscal Policy
Medium-term Fiscal Goals
At the core of our economic program is our intention to accelerate the pace at which we have
been reducing the federal government’s primary deficit since 2016. We reaffirm our
longstanding commitment to reaching fiscal equilibrium and we will bring the primary balance
of the federal government to zero by 2020.
We will reduce public spending to appropriate and sustainable levels as this is fundamental in
order to attain both fiscal and macro-economic balance.
We started with an oversized primary expenditure in 2015. Before the 2001-2002 crisis, the
consolidated primary spending of the three levels of government (federal, provincial and
municipal) represented 26 percent of GDP, and by 2015 it had reached 42 percent of GDP
(increase driven mainly by the public wage bill, pension benefits, and energy and
transportation subsidies). From that peak, we have brought down primary expenditure during
2017 by almost 2 points of GDP.
In 2017 we over-achieved the fiscal target of the Federal government by 0.4 percent of GDP
with primary expenditures increasing slower than revenues for the first time since 2004.

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Primary spending last year was reduced by 1.3 percent of GDP, a decrease which had not been
seen since 1991. During the first 5 months of 2018 we managed to reduce the federal primary
deficit by 40 percent with revenues growing 5 percentage points faster than expenditures.
Primary spending contracted by 6 percent in real terms year-over-year.
Our assessment is that our chosen medium-term fiscal framework will ensure that gross public
debt to GDP will fall from 2018 onwards, reaching 55.8 percent of GDP by end-2021. We are
also committed to undertaking proactive debt management to lengthen maturities, optimize
the cost of our liabilities, and increase the share of our federal public debt that is denominated
in pesos.
We intend to achieve this more front-loaded fiscal trajectory by meeting the fiscal target in
2018 that we have already announced (primary deficit of 2.7 percent of GDP) and making
important additional effort in the 2019 budget. Specifically, by October 2018 we will submit to
Congress a federal budget that targets a primary fiscal deficit of 1.3 percent of GDP in 2019,
and this is a structural benchmark for our program.6
In light of the uncertainties we currently face, we will ensure that our revenue forecasts in the
budget are appropriately conservative and we intend, as a prudent contingency, to build in
some spending reserves that will only be drawn in case of unexpected developments. If
circumstances change and economic outcomes are not in the direction we currently expect, we
stand ready to identify additional fiscal measures to achieve our intended primary balance
targets in 2018 and 2019. On the other hand, if economic and fiscal outturns evolve in a more
positive direction, we would be prepared to undertake a more front-loaded elimination of
distortive taxes in order to better support growth and investment (in line with the pace that
was outlined in the tax reform that was adopted in late 2017).
This pace of convergence to a balanced budget at the federal level will be matched by the
provinces with the consolidated primary balance of the provinces expected to go from a deficit
6
The budget balance for program purposes is defined in the TMU.

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of 0.4 percent of GDP in 2017 to a surplus of 1/4 percent of GDP by the end of the Stand-By
Arrangement.
Fiscal Policies
These fiscal targets will be supported by several key policy measures:
 We will continue to make progress on the reduction of subsidies on energy and transport
with the objective of increasing the proportion of the cost of producing those services that
is covered by prices charged to the consumer from around 80 percent in 2017 to 90
percent in 2020, on average, for gas, and from almost 60 percent in 2017 to 90 percent in
2020, on average, for electricity. At the same time, we will continue working towards
eliminating the differences across regions. We will maintain the social tariff component
that will protect those that cannot afford the higher tariffs.
 We will continue our efforts to rationalize public sector employment, which will be reduced
through: (i) the sustained attrition of non-priority employees, (ii) a commitment to freeze
new hiring in the federal civil service for two years, and (iii) permanently closing redundant
positions. Our goal is that spending on personnel declines from 3.2 percent of GDP in 2017
to 2.7 by the end of the program.
 We will reduce other goods and services spending of the federal government by 15
percent in 2018, in real terms, relative to the 2017 outturn. We will continue this process in
2019. Strict control over commitments will prevent accumulating arrears.
 While we will continue executing the public infrastructure projects that are key to foster
the competitiveness of the country, we will delay those that are not deemed crucial.
 We will reduce transfers associated with the operating deficit of Government enterprises
that are not related to public utility tariffs, from their current level of 0.1 percent of GDP in
2017 to almost zero in 2021.
 We remain pledged to the commitment that we took with the Ley de Reparación Histórica
to work within the appropriate parliamentary Commission towards improvements in the
pension system that will make it financially sustainable and fairer for both current and
future generations.

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 While we remain committed to the reduction and eventual elimination of distortive taxes
in line with the Tax reform adopted in late 2017, we will extend the implementation period
of some of these changes as necessary to achieve our fiscal targets.
 We remain committed to improving Argentina’s federal fiscal structure. The automatic

transfers from the Federal Government to the Provinces have increased in recent years,
and will continue to increase through 2020. The discretionary transfers to Provinces
associated with expenditure responsibilities that have been assigned to each Province by
the Constitution will be reduced going forward, as the Provinces take over those
responsibilities. These identified reductions in spending are designed to ensure that the
incidence is not borne by social assistance or other poverty alleviation programs that are
executed at the provincial level.
 We do not expect the reduction of discretionary transfers to Provinces to lead to larger

fiscal deficits at the Provincial level. The Fiscal Responsibility Law passed in late 2017
contributes towards achieving a sustainable fiscal path for the federal government and the
provinces. Under the provisions of the law, the contemplated increase in automatic
transfers to the provinces will offset the anticipated reduction in discretionary transfers to
the provinces. In addition, the law establishes that primary spending cannot be increased
in real terms. This implies that, for the first time in many years, we foresee that the
aggregate fiscal position of the provinces will show a balanced primary budget in 2018 and
a surplus by the end of the Stand-By Arrangement. As described in the TMU, a floor for the
primary federal fiscal deficit at a general government level is an indicative target of the
program.
 We will continue working towards rationalizing tax expenditure in the corporate income
tax. We will also continue to publish a complete accounting of all tax expenditures in the
budget.
 We will amortize pension fund assets that are currently held by the government as a mean
to help finance the government payment of pensions, including those contained in the Ley
de Reparación Histórica.
In case the economy were to underperform and federal tax collection were to be affected, we
have identified a further 0.2 percent of GDP in contingent expenditure cuts (largely on
infrastructure) that will be drawn upon in order to meet the fiscal targets.

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Improving the fiscal framework
Beyond the fiscal path itself, we have been working on strengthening our fiscal and budgetary
framework in a way that increases transparency, provides the public with a more complete
view of our fiscal position and risks, helps build credibility, and guides expectations.
Specifically, our plan contemplates:
 That the annual budget provides simple and transparent medium-term objectives for the
primary balance that are consistent with the parameters of the program. The budget shall
include details on realistic and prudent macroeconomic assumptions underlying the
medium-term outlook, a statement of fiscal risks and of tax expenditures, and details on
the key policy measures that will be undertaken to achieve the 2019 primary balance
objective. The budget will contain a classification of revenues and of current and capital
spending that is consistent with the most modern methodologies of fiscal reporting. In
addition, we commit to include in the budget law the elimination of Article 27 of Law
11,672. This is a structural benchmark for our program (Table 3).
 To introduce a new mid-year fiscal report, starting in June 2019, that contains updated
estimates of fiscal outturns and revised macroeconomic and fiscal projections for the
medium-term.
 To make sure that the Federal Council of Fiscal Responsibility (FCFR) and the recently
created Congress Budgetary Office (CBO, Oficina de Presupuesto del Congreso) have
sufficient funding and capabilities to pursue their missions. The CBO is tasked with
periodically evaluating macroeconomic and budgetary forecasts, providing independent
costing to Congress of new policy initiatives, assessing the government’s fiscal plans
(including the annual budget). This is a structural benchmark in the program. The FCFR is
mandated to monitor and evaluate fiscal performances of Federal and provincial
governments, including compliance with the Fiscal Responsibility Law.
 To develop a fiscal risk analysis framework with a view to include it in the 2020 budget
documents. The framework shall contemplate the publication of a fiscal risk scenario
analysis, a long-term fiscal sustainability analysis (undertaken for the federal and
consolidated government), and an analysis of contingent liabilities (explicit and implicit),
including those related to the financing of PPP projects and to the unfunded pension
obligations of the government.

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 To support reaching our fiscal targets we will strengthen our revenue administration. We
will continue working within our Tax Administration Agency (AFIP, Administración Federal
de Ingresos Públicos) on improving our compliance plans and risk mitigation strategies
around taxpayer segments, taxpayer obligations, and core taxes. This is a structural
benchmark for our program.
B. Protecting Society’s Most Vulnerable
Past fiscal reforms in Argentina have floundered because insufficient attention was given to
building the needed social consensus for reform and, particularly, to protecting society’s most
vulnerable from the burden of the needed changes. We will not make this mistake. This is
particularly pressing given the intolerable situation with regards to poverty that we inherited
from the previous administration.
A central plank of our policy plan is to put in place measures that will offer opportunity and
support to those living in poverty and for the less well-off members of Argentine society. We
will concentrate our efforts on the protection of children and young people, whose poverty
levels are substantially higher than those of any other group in our society.
We will adopt a set of social indicators to be monitored within the periodic reviews as a central
component of the program. During the duration of the program we intend to continue
improving Argentina’s social safety net. The protected social expenditure and safeguards will
be channeled through existing automatic, well-targeted cash transfer programs that reach
most of the poor and vulnerable population.
We will maintain a floor on social assistance spending of 1.3 percent of GDP, a level that
safeguards program coverage for 2019-20 while allowing benefits to rise according to the
existing indexation formula. This is a performance criterion in the program. The floor will
involve a defined set of programs that cover children through the existing social safety net: the
Asignación Universal por Hijo (AUH) conditional cash transfer program and the Asignación por
Embarazo (AUE – pregnancy allowance) which are included under the budgetary program
named “Asignación Universal para Protección Social.” Both programs are efficiently

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administered, have ample coverage, and have been shown to be well targeted and to induce
positive socioeconomic outcomes in the target population. In addition, the floor will also
protect social spending on Contributive Family Allowances (including allowances to
“monotributistas”). All the allowances mentioned in this paragraph are included under the
budgetary program named “Asignaciones familiares”.
In addition, as future prospects are uncertain, we may well need to spend more resources on
the “Asignaciones Universales para Protección Social” (high quality social assistance programs
that are specifically designed to protect the most vulnerable) in case social conditions worsen.
Hence, we intend to build into our plan a provision to allow additional spending of up to
AR$13.5 billion in 2018 and the equivalent of 0.2 percent of GDP on these highly targeted and
well administered programs.
We will also revise the design of social protection programs to make them more efficient and
better targeted, where needed. Specifically:
 We will work together with IFIs in order to strengthen programs that protect households
or singles with no children, as this part of the population is less satisfactorily reached by
existing social safety net.
 We will continue working with the provinces to integrate the provision of services, reduce
duplication, improve targeting and lower the administrative costs of the social programs.
 We will revise the social tariffs system to make it better targeted (in particular toward the
bottom 4 deciles of the income distribution).
C. Supporting Gender Equity
Enabling Argentine women to live up to their potential is not only a moral issue it also makes
economic sense. Women in Argentina earn less than men on average for similar posts, are
more likely to work in the informal economy, are less likely to participate in the labor force,
and suffer poorer employment conditions. Addressing this situation has been a concern since
the start of our administration, and we will continue to do so as part of our policy efforts. We
will reinforce the steps we have already taken in order to level the playing field and provide
women with the economic opportunities and support that every Argentine citizen is entitled
to.

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Specifically, we intend to:
 Work towards reforming the current tax system so as to reduce the disincentives for
women to participate in the labor force.
 Continue implementing our projects and initiatives on actions to promote equal pay, a
more equal system of paternity and maternity leave (both in our Propuesta de Ley de
Equidad de Género, submitted to Congress this year).
 Continue building infrastructure for childcare and early child education.
 Require listed companies to publish data annually on the gender balance on their Board
and among their managerial positions.
 Continue working on our initiatives to fight gender-based and domestic violence and
provide support networks for victims of such violence (Plan Nacional de Acción para la
Prevención, Atención y Erradicación de Violencia contra las Mujeres).
D. Monetary Policy
We will redouble our efforts to reduce inflation, which has placed hardship on the Argentine
population. To that end, we remain committed to an inflation targeting framework for
monetary policy. While the monetary policy managed to reduce inflation in the second half of
2016 and in 2017, the results fell short of what we would have liked. We will strengthen the
institutional framework for monetary policy, and steadily build credibility through actions that
show our commitment to our inflation objectives.
Reinforcing the BCRA’s autonomy
To reinforce our commitment to low and stable inflation, we will strengthen the central bank.
By March 2019, we will submit to Congress a new charter for the central bank. This is a
structural benchmark for our program. This charter will give the central bank more operational
autonomy and will also increase accountability and transparency at the institution. Among
other features, the new charter will:

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 Reinforce price stability as the key mandate of the BCRA.
 Give the BCRA the authority to set, in consultation with the Ministry of the Treasury, the
inflation targets for the three years ahead.
 In order to improve accountability, in case of material deviations from the targets the
BCRA will send a public letter to Congress and the President, explaining the reasons for the
deviation and how it intends to address it.
 Provide for well-defined and limited grounds by which the Governor, Vice-Governor, and
Board members could be dismissed from their positions.
 Improve transparency by restoring international accounting standards, to ensure a

transparent report of the Central Bank’s balance sheet.
 Discontinue all direct or indirect central bank financing of the Government and reduce the
credit exposure of the central bank to the government in a predictable and phased
manner.
 Clarify the legal status of the BCRA’s official foreign reserves, which should only serve to
implement exchange rate and monetary policies.
 Limit transfers to the Treasury only to realized profits, which will only take place when the
BCRA’s capital exceeds an adequate level. Unrealized profits and losses from foreign
currency revaluation would be booked separately on a revaluation account and not
distributed.
In order to show our commitment to these principles, we have committed on June 7 to

immediately end all new direct or indirect central bank transfers to the Treasury. The continued
adherence to this policy represents a performance criterion within the program. The BCRA will
also begin working on improving transparency and accountability by introducing the
International Financial Reporting Standards within the next two years.
Central Bank Balance Sheet
Under the previous two administrations, the central bank’s financial structure has been
severely compromised. Non-interest bearing, non-marketable securities were built up on the

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central bank’s balance sheet, in detriment of international reserves, in an effort to mask the
real magnitude of the government's debt.
The time has come to reverse these measures and provide the central bank with a solid
balance sheet to achieve its price stability objective. This will start with an independent
assessment of its balance sheet and the adoption of international accounting standards,
including a more transparent valuation of the BCRA’s assets and liabilities. By December 2019,
the government is committed to provide the BCRA with financial autonomy in the form of an
adequate level of capital. This is a structural benchmark under the program (Table 3).
As part of this process, the Ministry of Finance intends to gradually repurchase a sizable
portion of the non-marketable government securities held by the Central Bank, starting in June
2018. The objective is to reduce the BCRA’s net claim on the government by at least US$25
billion by May 2021, which is a performance criterion within the program (Table 2).
The BCRA is committed to reducing the vulnerability attached to an excessively large stock of
LEBAC securities, and to fostering the re-intermediation of the financial sector. To this end, the
repayment of government liabilities held by the central bank will be used to drain peso
liquidity, lessening the central bank’s reliance on issuing LEBAC securities. To facilitate this
process, we will establish a senior-level debt management coordinating committee between
Treasury-Finance-BCRA that shall meet weekly and coordinate activities linked to sterilization
and debt issuance plans. This is a structural benchmark under the program (Table 3).
Moreover, the BCRA intends to limit its counterparties to local banks by the end of September
2019, which represents a structural benchmark for the program.
Inflation Goals
In the context of its strengthened independence, the BCRA has decided to re-establish realistic
and meaningful inflation targets. While it is regrettable to again reset our targets to a higher
path for inflation, this change is inevitable given the financial market volatility that Argentina
has experienced and the inflationary impulse that is underway following recent depreciation of
the exchange rate and increases in world energy prices.

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With a new and stronger fiscal plan, we believe that now is the right moment to set our
inflation targets for the next three years, and commit to do whatever it takes to meet them.
The program includes consultation bands surrounding the inflation target and net domestic
assets of the central bank, a way of stepping up our commitment to the disinflation process
(Table 2).
We have formally adopted new targets for the BCRA to achieve a year-on-year rate of
consumer price (IPC) inflation. The target will be equal or below current market expectations
(REM) for end 2018 (27 percent), and then 17 percent, 13 percent and 9 percent by the end of
the following 3 years.
Given the uncertainties in the initial stage of this effort, we are committed to maintaining our
current restrictive monetary policy until we see a tangible sign that both realized inflation and
end-2019 inflation expectations are starting to move lower.
We will calibrate our monetary policy in a forward-looking manner to ensure that inflation
converges to our targets. Once inflation expectations are well anchored to our targets, in the
event of an identifiable adverse supply or external shock, we would adjust policies to bring
inflation back to the target over a time horizon that is consistent with our understanding of the
lags in monetary policy and is sensitive to the size, nature, and persistence of that shock.
Exchange Rate
As part of our inflation targeting framework we are fully committed to a flexible and market-
determined exchange rate. We intend to limit the sales of foreign currency reserves to periods
when there is clear market dysfunction. Even then, we plan to absorb such external pressures
through a flexible exchange rate and very limited foreign currency sales to accommodate such
market-driven pressures on the peso.
Over the medium-term, our intention is to build international reserves to levels that are
prudent given Argentina’s exposure to global shocks on both the current and capital accounts.
As part of a mechanism to achieve this reserve build-up, we will not let net international
reserves fall below a floor that provides some space for the decumulation of reserves during

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the current period of market volatility but which also rises over time until reaching an
adequate level (Table 2).
In the unlikely event that our intervention in foreign exchange markets (both spot and
forwards) is above what is consistent with meeting this path we will engage with the IMF staff
to discuss the conditions in foreign exchange markets and our policy response.
The BCRA will publish by the end of June 2018 a regulation that introduces a foreign exchange
auction to intervene in the spot and forward markets, a structural benchmark for the program
(Table 3).
The BCRA, at the request of the Treasury, will announce a program to sell in the market part of
the IMF budget support to fund the peso denominated obligations of the Treasury. The
program will consist of preannounced daily sales, which will be executed through a foreign
exchange auction.
E. Banking Sector
We view the risks of the current macro-economic circumstances on the banking sector as
limited because of the small size of the sector, its high level of capital and liquid assets, as well
as the limited exposure of banks to the sovereign. We will, however, closely monitor
developments in the financial sector and prepare ourselves to respond promptly to any sign of
deterioration in this sector.
F. The Economic Outlook Underpinning the Program
Recent financial market volatility, the drought that affected our agricultural economy, and
higher world energy prices are taking a toll on the economy. So, our expectation is that
growth will be between 0.4 percent and 1.4 percent for the year as a whole. As has been
characteristic of this administration at the time of planning fiscal performance, we rather err on
the conservative side, for which reason we are working with an assumption of economic
growth being 0.4 percent for fiscal projection purposes.

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We expect the combined effect of our economic program and the IMF’s support for Argentina
to quickly rebuild confidence allowing for a reduction in the cost of financing and supporting a
return of capital inflows. Both factors, together with the weaker real exchange rate, should
facilitate an increase in capital investment and job creation. Growth for 2019 as a whole is
expected to be around 2 percent. Stronger investment and efforts in the program to lessen
distortions will likely lead to an acceleration of potential GDP through the medium-term,
supported by greater capital formation, an increase in the labor supply, and higher efficiency
and productivity.
The prospects for the balance of payments are good with our policy program likely to lead to a
rapid reversal of the recent rise in the current account deficit. The current account deficit is
likely to continue falling through 2020 which should be comfortably financed by foreign direct
investment inflows. Additional portfolio capital inflows are expected, which, as discussed
above, the central bank intends to absorb through an increase in the stock of international
reserves.
G. Supply Side Policies
Our administration is committed to increasing growth and private investment as a means to

raising living standards for all of Argentina’s people. To do this we need to make Argentina an
attractive destination for local and international businesses alike. Much has been achieved in
reversing the distortions put in place by the past administration and in rooting out corrupt
practices. However, there is more to be done.
We will continue strengthening the anti-corruption regime, focusing on its effective

implementation, improving the institutional framework, and strengthening prosecutorial and
judicial proceedings. We are working with the OECD on a study on integrity in Argentina,
which will help design general strategies and efficient public policies.
On AML-CFT, we want to improve the legal framework in certain areas, including the regime of
penalization of noncompliance with prescriptions of the law, and strengthen information-
sharing, and asset freezing and administration capabilities. On the regulatory and supervisory
front, the Financial Intelligence Unit will continue strengthening its operations leaning on a

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risk-based approach and strategic analysis to fight crime. In this regard, we are committed to
further strengthening the AML and anticorruption frameworks and ensuring their effective
implementation, and we will design concrete measures to this effect in consultation with Fund
staff by the first review date. In all these matters, we would welcome technical assistance by
the IMF.
Our administration has made major progress in rebuilding statistical information about the
economy and regaining credibility in this area. We will continue our efforts to improve our
statistical system to further align it with the internationally accepted methodologies and
reporting standards, in collaboration with international organizations, including the OECD and
IMF.
Developing Domestic Credit Markets
The newly enacted Ley de Financiamiento Productivo aims at developing financing for small
sized corporations and household mortgages, while promoting savings and strengthening
transparency and certainty in credit markets. Key instruments to develop financing for small
and medium-sized firms are new electronic invoices to facilitate factoring, simplified
debentures, and tradable IOUs. For enhancing access to housing, the law allows for inflation-
adjusted mortgages, which will facilitate securitization, covered bonds, and new insurance
instruments for mortgages. To promote long-term savings and investment, the law eliminates
double taxation in closed-end mutual funds which anchor productive and real-estate
investments. Enhancing transparency and reducing uncertainty, the national securities
commission (CNV) is empowered to issue regulations to avoid conflicts of interest in the asset
management industry, reduce systemic risk, simplify administrative processes, and pursue
faster sanctions for noncompliance. Importantly, the CNV has lost previous powers to
intervene corporations and appoint overseers to their boards with veto powers on corporate
actions. We enjoy the benefits of a stronger capital markets regulator with less discretionary
powers.

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Competition Reform
The new antitrust regulatory framework, approved by Congress in May 2018, adopts best
international practices to deter collusion and strengthens the independence, transparency,
efficiency and predictability of the agency in charge of overseeing these matters. One of the
main objectives of the new law is the creation of an independent authority, the National
Competition Authority (the “ANC”), with sufficient powers to adopt its own decisions, control
its own budget, and function without political interference.
Regarding mergers and acquisitions, the new law includes an ex-ante control, which would
replace the current ex-post regime. This change comes to solve a current problem of mergers
and acquisitions, which are submitted for evaluation after deals are closed. This also creates
new important challenges for the antitrust authority, in terms of timing for decision making,
which will be addressed through a fast-track procedure for those mergers and acquisitions
that fall into a specific scope of low potential impact on competition. This change serves the
purpose of speeding up the procedure in those cases, as well as dedicating more resources to
more complex cases.
Following international best practices, the new law includes a leniency program, with the
purpose of facilitating proper detection, prosecution and sanction of cartels. Argentina has a
poor record of cartel sanctioning compared to other countries in Latin America which have
already implemented their own leniency programs.
Finally, the law also provides for the creation of a specialized court (the Appellate Court in
Antitrust Matters) to deal with competition matters, in order to improve the judicial review of
the competition authority decisions. This specialized court shall act under the scope of the
Federal Courts of Appeals in Civil and Commercial Matters.
De-bureaucratization
The government remains committed to improving the relationship between the State and
Argentina’s citizens and productive sectors, through administrative simplification and de-
bureaucratization efforts. To this end, Congress recently approved a law to remove useless
regulations and costly norms. Among others, the law allows simplified incorporation of

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corporations, allows for digital accounting record keeping, simplifies the process of granting
patents, expedites the establishment of ports, unifies air traffic control, removes restrictions on
road cargo transportation and circulation of agricultural equipment, and removes barriers for
access to financial services. The law also upgrades bureaucratic procedures resulting in shorter
processing times and allowing for digital files and electronic signatures at all levels of the
federal government.
Table 1. Argentina: Schedule of Reviews and Purchases
Amount of Purchase
Available on or after SDR millions % Quota Conditions 1/
June 20, 2018 10,613.71 333% Approval of Arrangement

September 15, 2018 2,063.78 65% First Review and end-June 2018 performance criteria
December 15, 2018 2,063.78 65% Second Review and end-September 2018 performance criteria
March 15, 2019 2,063.78 65% Third Review and end-December 2018 performance criteria
June 15, 2019 2,063.78 65% Fourth Review and end-March 2019 performance criteria
September 15, 2019 2,063.78 65% Fifth Review and end-June 2019 performance criteria
December 15, 2019 2,063.78 65% Sixth Review and end-September 2019 performance criteria
March 15, 2020 2,063.78 65% Seventh Review and end-December 2019 performance criteria
June 15, 2020 2,063.78 65% Eigth Review and end-March 2020 performance criteria
September 15, 2020 2,063.78 65% Ninth Review and end-June 2020 performance criteria
December 15, 2020 2,063.78 65% Tenth Review and end-September 2020 performance criteria
March 15, 2021 2,063.78 65% Eleventh Review and end-December 2020 performance criteria
June 1, 2021 2,063.71 65% Twelfth Review and end-March 2021 performance criteria
Total 35,379 1110%

1/ Apart from periodic performance criteria, conditions also include continuous performance criteria.

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Table 2. Argentina: Quantitative Performance Criteria, Indicative Targets, and Consultation Clauses 1/2/
(In billions of Argentine pesos unless otherwise stated)
Proposed Performance Criteria Indicative Targets
2018 2019
end-Jun end-Sep end-Dec end-Mar end-Jun
Fiscal targets
Performance Criteria
1. Primary balance of the federal government (floor) 3/ 10/ -148.0 -256.0 -362.5 -32.0 -100.0
2. Federal government accumulation of external debt payment arrears (ceiling) 4/ 0.0 0.0 0.0 0.0 0.0
3. Federal government accumulation of domestic arrears (ceiling) 5/ 8.2 14.9 21.6 27.1 39.7
4. Social assistance spending (floor) 87.7 131.1 177.5 60.0 112.6
Indicative targets
5. Primary balance of the general government (floor) 3/ -163.0 -272.0 -382.4 -40.0 -110.0
Monetary targets
6. Change in net international reserves (floor) 6/ 10/ 5.5 5.5 5.5 5.5 7.5
7. Change in stock of non-deliverable FX forwards (ceiling) 7/ 1.0 0.0 -0.5 -1.0 -1.5
8. Change in central bank credit to government (ceiling) 8/ 0.0 -78.0 -156.0 -234.0 -312.0
9. Central bank financing of the government (ceiling) 4/ 0.0 0.0 0.0 0.0 0.0
Inflation Consultation Clause
10. Inflation bands (in percent, y-o-y)
Outer Band (upper) 32 32 32 28 26
Inner Band (upper) 29 29 29 26 24
Center inflation target 27 27 27 24 22
Inner Band (lower) 25 25 25 22 20
Outer Band (lower) 22 22 22 20 18
11. Change in net domestic assets of the central bank (ceiling) 9/ 10/ 15 64 166 173 184
1/ Targets as defined in the Technical Memorandum of Understanding (TMU).

2/ Based on program exchange rates defined in the TMU.
3/ Cumulative flows from January 1 through December 31.
4/ Continuous performance criterion.
5/ The accumulation is measured against the average during Q4 2017, which stood at 45.6 billion pesos.
8/ The change is measured against the value on end-May 2018, which stood at 2,204.4 billion pesos, as defined in the TMU.
9/ The change is measured against the value on end-May 2018, which stood at 432.9 billion pesos, as defined in the TMU.
10/ Targets subject to adjustors as defined in the TMU.
Table 3. Argentina Structural Program Conditionality
Structural Benchmarks Timing Implementation status
Publish a regulation to introduce a foreign exchange auction for BCRA intervention in the spot and forward
1 Jun-2018 Proposed
markets.
Establish a senior-level debt management coordinating committee between Treasury-Finance-BCRA that

2 Sep-2018 Proposed
would meet weekly and coordinate activities linked to sterilization and debt issuance plans.
Present a 2019 budget to Congress, with transparent medium-term objectives for the primary balance, that
are consistent with the parameters of the program. The budget would include details on realistic and
3 prudent macroeconomic assumptions underlying the medium-term budget, a statement of fiscal risks and of Oct-2018 Proposed
tax expenditures, and details on the key policy measures that will be undertaken to achieve the 2019 primary
balance objective. The budget will include the elimination of article 27 of Law 11,672.
Provide sufficient resources to the newly created CBO (Oficina de Presupuesto del Congreso), so that it can
effectively evaluate macroeconomic and budgetary forecasts (including those contained in the annual
4 Dec-2018 Proposed
budget and MTFF), provide independent costing to Congress of new policy initiatives, assess the
government’s fiscal plans (including the annual budget), and monitoring public finances at the central level.
Submit to Congress a new charter for the central bank that will ensure operational autonomy, strengthen the
5 BCRA’s monetary policy mandate, enhance decision-making structures, and buttress transparency and Mar-2019 Proposed
accountability
6 Limit the BCRA’s counterparties for sale of LEBACs, open market operations and repos to domestic banks. Sep-2019 Proposed
Recapitalize the central bank to ensure it has the adequate level of capital as percent of the monetary base
7 Dec-2019 Proposed
plus the outstanding stock of LEBACs.
Design a compliance improvement plan and risk mitigation strategies around taxpayer segments, taxpayer
8 Jun-2019 Proposed
obligations, and core taxes.

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Attachment II. Technical Memorandum of Understanding
1. This Technical Memorandum of Understanding (TMU) sets out the understandings

regarding the definitions of the performance criteria (PCs), indicative targets (ITs), and
consultation clauses, that will be applied under the Stand-by Arrangement, as specified in the
Memorandum of Economic and Financial Policies (MEFP) and its attached tables. It also
describes the methods to be used in assessing the program’s performance and the
information requirements to ensure adequate monitoring of the targets.
2. For program purposes, all foreign currency-related assets, liabilities and flows will be
evaluated at “program exchange rates” as defined below, with the exception of items affecting
government fiscal balances, which will be measured at current exchange rates. The program
exchange rates are those that prevailed on May 31, 2018. Accordingly, the exchange rates for
the purposes of the program are shown in Table 1.
Table 1. Program Exchange Rates 1/

Argentine Pesos to the US dollar 24.96
Argentine Pesos to the SDR 35.36
Argentine Pesos to the Euro 29.14
Argentine Pesos to the Canadian dollar 19.22
Argentine Pesos to the British pound 33.16
Argentine Pesos to the Renminbi 3.89
Gold prices (US$/ounce) 1298.29
1/ Average daily selling rates at the end of May 2018.
3. Any variable that is mentioned herein for the purpose of monitoring a PC or IT and
that is not explicitly defined, is defined in accordance with the Fund's standard statistical
methodology, such as the Government Finance Statistics. For any variable or definition that is
omitted from the TMU but is relevant for program targets, the authorities of Argentina shall
consult with the staff on the appropriate treatment to reach an understanding based on the
Fund's standard statistical methodology.

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General Definitions
4. Pre-announced BCRA foreign exchange sale of the counterpart of Fund resources to be

used for budgetary purposes definition: the BCRA sells for the Treasury a pre-announced
amount of US dollars on a daily basis to fund Treasury obligation denominated in pesos. The
program is fixed for a month and the daily fixed amount is announced at least three business
days ahead of time.
5. Foreign exchange auction definition: the auction is a mechanism in which the BCRA
sells US dollars to banks for Argentine pesos. All banks in Argentina can participate in the
auction. Bids are allotted solely based on the price proposed by the counterparties, starting
from highest peso per US dollar rate until the pre-announced amount is exhausted. The
auction weighted average, marginal rate, total bid amount, and the final allotment are
published one hour after the auction allotment.
QUANTITATIVE PERFORMANCE CRITERIA: DEFINITION OF VARIABLES
6. Definitions: The Federal government (Sector Público Nacional No Financiero) for the
purposes of the program consists of the central administration, the social security institutions,
the decentralized institutions (Administración Nacional), and PAMI, fiduciary funds, and other
entities and enterprises of the federal government.
Cumulative Floor of the Federal Government Primary Balance
7. Definitions: The primary balance of the Federal government is defined in accordance

with the monthly and annual reporting of the “Esquema IMIG”. This is equivalent to total
revenues (ingresos totales, according to “Esquema IMIG”) minus primary spending (gastos
primarios). Revenues are recorded on a cash basis and include tax revenues (ingresos
tributarios), revenue income (rentas de la propiedad), other current revenues (otros ingresos
corrientes), capital revenues (ingresos de capital), and imputed revenues associated with the
2008 nationalization of private pension assets. Revenues exclude financial transfers from the
Central Bank (Adelantos Transitorios), interest income from intra-public sector holding of
securities and debt obligations, and proceeds from the sale of other financial assets. Profit
transfers from the central bank would, however, be regarded as revenues for program
purposes.

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8. Federal government primary expenditure is recorded on a cash basis and includes

spending on social protection (prestaciones sociales), economic subsidies (subsidios
económicos), operational expenses (gastos de funcionamiento), current transfers to provinces
(transferencias corrientes a provincias), other current spending (otros gastos corrientes), and
capital spending (gastos de capital), which includes capital transfers to provinces, and capital
spending on Programa de Inversiones Prioritarias currently recorded under “Adelantos a
Proveedores y Contratistas”.
9. The accounting of the revenues from pension assets held by the Fondo de Garantía y
Sustentabilidad (FGS) as a result of the 2008 pension fund nationalization poses a complex
methodological issue. While the budget reported an immediate increase in pension spending
after 2008, it never reported the revenues (contributions) capitalized in the nationalized
pension assets available in 2008. The authorities and staff agreed on an IMF technical
assistance mission by end-2018, that will collect the necessary information and advise the
authorities on the correct record keeping of the nationalization operation and of subsequent
changes to the pension system that is consistent with sound statistical principles as embedded
in the IMF’s Government Finance Statistics. Should the mission’s recommendations lead to any
changes in the measurement of the budget balance, no additional policy measures would be
sought or applied for the purposes of the IMF-supported program. For the time being, the
value of pension fund assets seized in 2008 will be spread over time as revenue to partially
offset future pension spending. In particular, the amount will be divided by the average life
expectancy of contributors to those schemes at 2018, that is 20 years. The limit on the amount
to be recognized as revenue shall be 0.4 percent of GDP per year.
10. Government-funded, public-private partnerships will be treated as traditional public

procurements. Federal government obligations associated with public private partnerships
would be recorded transparently in budget data and measured as part of the Federal
government deficit as they occur (on a cash basis).
11. Costs associated with divestment operations or liquidation of public entities, such as
cancellation of existing contracts or severance payments to workers, will be allocated to
current and capital expenditures accordingly.

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12. All primary expenditures (including fines) that are directly settled with bonds or any
other form of non-cash liabilities will be recorded as spending above-the-line and will
therefore contribute to a decrease in the primary balance. This excludes the settlement of
pension liabilities towards people enrolled in the federal pension system (the Sistema
Integrado de Pensiones y Jubilaciones) incurred in the past and related to existing and pending
court rulings, and payments of arrears as per ICSID or similar arbitration rulings.
13. The Federal government’s primary balance will be measured at each test date as the
cumulative value starting from the beginning of each calendar year.
14. Monitoring: All fiscal data referred to above and needed for program monitoring
purposes will be provided to the Fund with a lag of no more than 25 calendar days after the
end of each month.
Floor on Federal Government Spending on Social Assistance Programs
15. Definition: Social spending for the purpose of the program is computed as the sum of
all federal government spending (both recurrent and capital) on the following social protection
programs:
 Asignación Universal para Protección Social which includes the following sub-programs:
Asignación Universal por Hijo, Asignación por Embarazo, and Ayuda Escolar Anual.
 Asignaciones Familiares Activos, which includes the Asignación Prenatal, por Adopción,
por Hijo, por Hijo Discapacitado, por Maternidad, por Matrimonio, por Nacimiento, and
the Ayuda Escolar Anual.
 Asignaciones Familiares Pasivos, which includes the Asignación Prenatal, por Cónyuge,
por Hijo, por Hijo Discapacitado, and the Ayuda Escolar Anual.
 Asignaciones Familiares Sector Público Nacional, which includes the Asignación

Prenatal, por Hijo, por Hijo Discapacitado, por Maternidad, and the Ayuda Escolar Anual.

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16. Monitoring: Data will be provided to the Fund with a lag of no more than 25 calendar
days after the end of each month.
Adjustors to the floor on the primary balance
17. Adjustor to the primary balance for social spending: The floor on the primary
balance of the federal government (cumulative since the beginning of the year) would be
adjusted downward by an amount equivalent to the amount that expenditures in the Universal
Allowances for Social Protection programs (Asignación Universal para Protección Social, which
includes the Asignación Universal por Hijo, the Asignación por Embarazo, and the Ayuda Escolar
Anual) exceed the programmed values defined in Table 2. The value of the adjustor would be
capped at 13,500 million of pesos in 2018 and 0.2 percent of GDP in each successive calendar
year.
Table 2. Social Spending Subject to Adverse

Economic Conditions
(program baseline)
AR$ millions 1/
end-June 2018 37,187
end-September 2018 55,368
end-December 2018 74,836
end-March 2019 25,818
end-June 2019 47,735
1/ Cumulative from January 1
18. Adjustor for external financing projects: The target for the primary balance of the
budget sector will be adjusted up (down) by the shortfall (excess) in the expenditure financed
by disbursements of external project loans by International Financial Institutions and bilateral
partners, compared to the capital expenditures settled in the budget (Table 3). The value of the
adjustor would be capped at cumulative 30,000 million pesos in 2018, and 0.2 percent of GDP
in each successive calendar year. Starting in 2019 the benchmark will be the expenditure
financed by disbursements of external project loans by IFIs and bilateral partners, as stated in
the budget.

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Table 3. Multilateral/Bilateral Funded Capital Spending

(program baseline)
AR$ millions 1/
end-June 2018 15,171
end-September 2018 20,025
end-December 2018 30,341
1/ Cumulative from January 1
Ceiling on Federal Government Accumulation of Domestic Arrears
19. Definition: Domestic arrears are defined as the floating debt, that is the difference
between primary spending recorded on an accrual basis (gasto devengado, from the SIDIF
system) and primary spending recorded on a cash basis (base caja, from the Treasury). This
excludes intra-public transfers (transferencias figurativas), and includes primary spending for
personnel (gasto en personal), acquisition of goods and services (bienes y servicios), non-
professional services (servicios no profesionales), capital expenditures (bienes de uso), and
transfers (transferencias).
20. Measurement: The arrears are measured on a daily basis. The program will cap the
quarterly average of arrears at 0.5 percent of GDP, that is at 67,500 million pesos by the end of
December 2018.
21. Monitoring: Data recorded at daily frequency will be provided to the Fund with a lag
of no more than 25 calendar days after the end of each month.
Federal Government Non-Accumulation of External Debt Payments Arrears
22. Definition of debt: External debt is determined according to the residency criterion
(and, as such, would encompass nonresident holdings of Argentine law peso and foreign
currency debt). The term “debt”1 will be understood to mean a current, i.e., not contingent,
liability, created under a contractual arrangement through the provision of value in the form of
1
As defined in Guidelines on Public Debt Conditionality in Fund Arrangements, Decision No. 15688-(14/107).

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assets (including currency) or services and which requires the obligor to make one or more
payments in the form of assets (including currency) or services, at some future point(s) in time;
these payments will discharge the principal and/or interest liabilities incurred under the
contract. Debts can take several forms; the primary ones being as follows:
i. Loans, i.e., advances of money to the obligor by the lender made on the basis of an
undertaking that the obligor will repay the funds in the future (including deposits, bonds,
debentures, commercial loans and buyers’ credits) and temporary exchanges of assets that
are equivalent to fully collateralized loans under which the obligor is required to repay the
funds and usually pay interest, by repurchasing the collateral from the buyer in the future
(such as repurchase agreements and official swap arrangements);
ii. Suppliers’ credits, i.e., contracts where the supplier permits the obligor to defer
payments until sometime after the date on which the goods are delivered or services are
provided; and
iii. Leases, i.e., arrangements under which property is provided which the lessee has the
right to use for one or more specified period(s) of time that are usually shorter than the
total expected service life of the property, while the lessor retains the title to the property.
For the purpose of the program, the debt is the present value (at the inception of the
lease) of all lease payments expected to be made during the period of the agreement
excluding those payments that cover the operation, repair or maintenance of the property.
23. Definition of external arrears: External debt payment arrears for program monitoring
purposes are defined as external debt obligations (principal and interest) falling due after May
30, 2018 that have not been paid, considering the grace periods specified in contractual
agreements. Under the definition of debt set out above, arrears, penalties and judicially
awarded damages arising from the failure to make payment under a contractual obligation
that constitutes debt are debt. Failure to make payment on an obligation that is not
considered debt under this definition (e.g., payment on delivery) will not give rise to debt.
24. Coverage: This performance criterion covers the federal government. This
performance criterion does not cover (i) arrears on trade credits, (ii) arrears on debt subject to

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renegotiation or restructuring; and (iii) arrears resulting from the nonpayment of commercial
claims that are the subject of any litigation initiated prior to May 30, 2018.
25. Monitoring: This PC will be monitored on a continuous basis.
Floor on the Change in Net International Reserves
26. Definitions: Net international reserves (NIR) of the BCRA are equal to the balance of
payments concept of NIR defined as the U.S. dollar value of gross official reserves of the BCRA
minus gross official liabilities with maturities of under one year. Non-U.S. dollar denominated
foreign assets and liabilities will be converted into U.S. dollar at the program exchange rates.
27. Gross official reserves are defined consistently with the Sixth Edition of the Balance of
Payments Manual and International Investment Position Manual (BPM6) as readily available
claims on nonresidents denominated in foreign convertible currencies. They include the (i)
monetary claims, (ii) free gold, (iii) holdings of SDRs, (iv) the reserve position in the IMF, (v)
holdings of fixed income instruments and (vi) net cash balances within the Latin American
Trade Clearing System (ALADI). Excluded from reserve assets are any assets that are pledged,
collateralized or otherwise encumbered, claims on residents, claims in foreign exchange arising
from derivatives in foreign currency vis-à-vis domestic currency (such as futures, forwards,
swaps and options), precious metals other than gold, assets in nonconvertible currencies and
illiquid assets.
28. Gross official liabilities in foreign currencies include (i) foreign currency liabilities with
original maturity of one year or less, (ii) the use of Fund resources extended in the context of
the exceptional financing package, (iii) any deliverable forward foreign exchange (FX) liabilities
on a net basis—defined as the long position minus the short position payable in foreign
currencies directly undertaken by the BCRA or by any other financial institutions on behalf of
the BCRA. The Federal government’s foreign liabilities are not considered as gross foreign
liabilities of the BCRA. The foreign currency swap with the People’s Bank of China would be
considered, for program purposes, as a foreign exchange liability of the BCRA with a maturity
of one year or less.
29. The change in net international reserves will be measured as the change in the stock of
NIR at each test date relative to the stock on June 4, 2018, which stood at US$23.1 billion.

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30. Monitoring: Foreign exchange asset and liability data will be provided to the Fund at
daily frequency within one day.
31. Adjustors:
 The NIR targets will be adjusted upward (downward) by the surplus (shortfall) in
program loan disbursements from multilateral institutions (the IBRD, IDB and CDB) and
grants, relative to the baseline projection reported in Table 4. Program loan
disbursements are defined as external loan disbursements (excluding project financing
disbursements) from official creditors that are usable for the financing of the general
government.
Table 4. External Program Disbursements (Baseline Projection)
Cumulative flows from end-May 2018 (In millions of US$)

Budget support loans from multilateral sources
End-June 2018 0
End-September 2018 0
End-December 2018 900
End-March 2019 900
End-June 2019 900
 The NIR targets will be adjusted downward by the total amount of dollars sold by the
Treasury through transparent, pre-announced, BCRA-run auctions undertaken each
business day to the market (to meet the peso obligations of the government) plus the
total amount of net cash payments financed from the accounts numbered 20501,
20502, 20503, 20504, 20505, 20506, 20518 on FX-denominated debt of the federal
government. This cumulative amount of this adjustor would be capped at US$7.5
billion.
Ceiling on the change in the BCRA’s stock of non-deliverable forwards (NDF)
32. Definitions. The stock of non-deliverable forwards (NDF) will be defined as the sum of
the U.S. dollar notional value of all contracts entered by the BCRA involving the
Argentinian peso, either directly or through any institution they use as their financial agent.

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33. Monitoring. Daily data will be provided to the Fund at the end of each day.
34. The change in the stock of NDF will be measured as the change in the stock of NDF at
each test date relative to the stock on June 4, 2018, which stood at US$2.3 billion.
Continuous Stop to BCRA’s Financing of the Government
35. Definitions. Central bank (BCRA) financing to the government includes overdraft
transfers from the BCRA to the Federal Government (line Adelantos Transitorios in the
summary account of the BCRA, as published on its web site), advance distribution of unrealized
profits, and the acquisition of government debt on the primary market or by purchase from
public institutions. The BCRA will extend zero net financing to the government for the duration
of the program.
36. Monitoring. Daily data will be provided to the Fund within two days. This target will
be monitored on a continuous basis.
Ceiling on Central Bank Credit to the Government
37. Definitions. Central bank (BCRA) credit to the government is defined as the sum of the
stock of government securities held by the BCRA (line Títulos Públicos in the summary account
of the BCRA, as published on its web site) and overdraft transfers from the BCRA to the Federal
Government (line Adelantos Transitorios in the summary account of the BCRA, as published on
its web site). Starting in July 2018, the stock of central bank credit to the government shall
decrease by the peso equivalent of US$3.125 billion per quarter until end-June 2019, and then
per semester until end-April 2021. By end-May 2021, the total decrease will correspond to
US$25 billion. This decrease in the claim shall reflect cash payments of this amount in pesos by
the Treasury to the BCRA; variation in the value of the claim due to changes in exchange rates
or accounting practices are excluded.
38. Monitoring. Daily data will be provided to the Fund within two days.
QUANTITATIVE INDICATIVE TARGETS: DEFINITION OF VARIABLES

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Cumulative Floor on Primary Balance of the General Government
39. Definition: The general government is defined as the federal government (as defined
above) plus the aggregate position of the provincial governments (defined for purposes of this
TMU as the 23 provinces plus the Autonomous City of Buenos Aires).
40. Definition: The primary balance of the general government will include the primary
balance of the federal government (as defined above, including adjustors) plus revenues of the
provincial governments (including transfers from the federal government) less cash
expenditures of the provincial governments. Total expenditures of the provincial government
will include wages, goods and services, transfers and subsidies, capital spending and transfers
to municipalities from the provincial government. Expenditures of municipalities and municipal
revenues are excluded. The result of the provincial governments will be measured from above-
the-line, with expenditure defined according to the information provided by the Secretaría de
Hacienda.
41. Reporting: Data will be provided to the Fund with a lag of no more than 60 calendar
days after the end of each quarter.
INFLATION CONSULTATION CLAUSE
42. Definitions. Inflation is defined as the change over 12 months of the end-of-period
headline national consumer price index (Indice de Precios al Consumidor, IPC), as measured
and published by INDEC.
43. Monitoring. Data will be provided to the Fund on a monthly basis with a lag of no
more than 20 calendar days after the end of each month.
44. The quarterly consultation bands on inflation are specified as follows:

ARGENTINA
Table 6. Inflation Consultation Band

2018 2019
Jun Sep Dec Mar Jun Sep Dec
Outer Band - Upper Limit 32 32 32 28 26 23 21
Inner Band - Upper Limit 29 29 29 26 24 21 19
Midpoint 27 27 27 24 22 19 17
Inner Band - Lower Limit 25 25 25 22 20 17 15
Outer Band - Lower Limit 22 22 22 20 18 15 13
45. Inflation prospects will be a critical part of each review under the arrangement. The
BCRA will discuss with the Fund staff the appropriate policy response should the 12-month
rate of IPCA inflation exceed the upper limit of the inner band specified in the table above.
Should the 12-month rate of IPCA inflation exceed the upper limit of the outer band specified
above, the authorities will complete a consultation with the Executive Board of the IMF on their
proposed policy response before purchases under the arrangement would become available.
Specifically, that consultation with the Executive Board will explain (i) the stance of monetary
policy and whether the Fund-supported program remains on track; (ii) the reasons for
deviations from the specified band, considering compensating factors; and (iii) proposed
remedial actions, as deemed necessary.
46. Definition: The BCRA’s net domestic assets (NDA) are defined as the difference
between the monetary base and the net international reserves of the BCRA (NIR), converted
into Argentine pesos at the program’s exchange rate.
 The monetary base includes currency in circulation and the accounts denominated in
Argentine pesos at the BCRA of the banks subject to the reserve requirement.
 The NIR are defined as in this TMU.
47. Monitoring: Data will be provided to the Fund on a monthly basis with a lag of no
more than 10 days.
48. Adjustor: The NDA ceiling will be adjusted if the minimum reserve requirement on
commercial banks is changed. The ceiling will be increased (decreased) by the same peso
amount as the increase (decrease) in required reserves.

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49. Adjustor: The NDA ceiling will be adjusted in line with any adjustments made to the
floor on the change in Net International Reserves at program exchange rates, as described in
this TMU, in the section on Quantitative Performance Criteria. The NDA ceiling will be
increased (decreased) by the same amount as the decrease (increase) in the floor on the
change in NIR.
50. Should the NDA of the BCRA exceed the upper limit, specified in Table 2 of the MEFP,
the authorities will complete a consultation with the Executive Board of the IMF on
their proposed policy response before purchases under the arrangement would
become available. Specifically, that consultation with the Executive Board will explain (i)
the reasons for deviations from the specified ceiling, considering compensating
factors; and (ii) proposed remedial actions, as deemed necessary.
INTERVENTION STAFF CONSULTATION CLAUSE
Ceiling on BCRA’s and the Federal government’s foreign currency intervention in both
spot and deliverable forwards markets
51. Definitions. Foreign exchange interventions are defined as spot and deliverable
foreign currency sales by the BCRA either directly or through any institution they use as their
financial agent. The BCRA commits to not loosen monetary conditions, particularly by lowering
the policy rate, in the context of foreign exchange interventions, until there has been such a
discussion with IMF staff.
52. Monitoring. Daily data will be provided to the Fund at the end of each day. This
consultation clause applies on a continuous basis.
Ceiling on the change in the BCRA’s stock of non-deliverable forwards (NDF)
53. Definitions. The stock of non-deliverable forwards (NDF) will be defined as the sum of
the US$ notional value of all contracts entered by the BCRA involving the Argentine peso,
either directly or through any institution they use as their financial agent.
54. If net sales exceed an accumulated amount, the BCRA commits to not loosen monetary
conditions, particularly by lowering the policy rate, until there has been such a discussion with
IMF staff.

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55. Monitoring. Daily data will be provided to the Fund at the end of each day. This
consultation clause applies on a continuous basis.
OTHER INFORMATION REQUIREMENTS
56. In addition to the data needed to monitor program conditionality, the authorities
will also provide the following data so as to ensure adequate monitoring of economic
variables:
A. Daily
▪ Nominal exchange rates; interest rates on domestic debt instruments including LETES (at
different maturities), LEBAC (at different maturities), and BOTES; total currency issued by
the BCRA; deposits held by financial institutions at the BCRA; required and excess reserves
of the banking sector in local and foreign currency; total liquidity assistance to banks
through normal BCRA operations, including overdrafts; interest rates on overnight deposits
and on 7-day repurchase and reverse repurchase agreements.
▪ Individual banks’ gross foreign exchange positions by currencies.
▪ Individual banks’ foreign currency accounts with the BCRA.
▪ Weekly: BCRA balance sheet.
B. Monthly
▪ Federal government operations including monthly cash flow from the beginning to the
end of the current fiscal year (and backward revisions as necessary), with a lag of no more
than 25 days after the closing of each month, according to both the format of the Informe
Mensual de Ingresos y Gastos (IMIG) and to the format of the Cuenta Ahorro Inversion
Financiamiento (AIF). On Federal and Provincial Debt:
▪ The expected monthly federal government and provincial government debt

amortization and repayments (local currency and FX bonds, treasury bills, Eurobonds,
domestic loans, external commercial and external official loans). This would include

ARGENTINA
both direct and guaranteed debt. In the case of issuance of government guaranteed
debt, include the name of the guaranteed individual/institution.
▪ Federal government and provincial government debt stock by currency, as at end

month, including by (i) creditor (official, commercial domestic, commercial external; (ii)
instrument (local currency and FX denominated bonds, treasury bills, Eurobonds,
domestic loans, external commercial and external official loans); and (iii) direct and
guaranteed.
▪ The balances of the (federal) government at the central bank and in the commercial
banking system needed to determine the cash position of the (federal) government.
▪ Deposits in the banking system: current accounts, savings and time deposits within six
weeks after month end. Average monthly interest rates on loans and deposits within two
weeks of month end; weighted average deposit and loan rates within six weeks after
month end.
▪ Balance sheets of other financial corporations (non-deposit taking), including holdings of

federal and provincial debt and of the BCRA instruments within one month after month
end.
▪ Data on the total loans value of all new federal government-funded public private
partnerships.

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ASSESSMENT OF THE RISKS TO THE FUND AND THE
June 15, 2018 FUND’S LIQUIDITY POSITION
Approved By Prepared by the Finance and Strategy, Policy, and Review

Andrew Tweedie and Departments.
Daria Zakharova
CONTENTS
INTRODUCTION __________________________________________________________________________2
BACKGROUND ____________________________________________________________________________3
THE NEW STAND-BY ARRANGEMENT—RISKS AND IMPACT ON FUND’S

FINANCES _________________________________________________________________________________7
A. Risks to the Fund ________________________________________________________________________ 7
B. Impact on the Fund’s Liquidity Position and Risk Exposure ___________________________ 11
ASSESSMENT ___________________________________________________________________________ 14
FIGURES
1. Debt Ratios for Recent Exceptional Access Arrangements ______________________________ 6
2. Credit Outstanding in the GRA around Peak Borrowing_________________________________ 8
3. Peak Fund Exposure and Debt Service Ratios for Recent Exceptional Access Cases _____ 9
4. Exceptional Access Levels and Credit Concentration __________________________________ 13
TABLES
1. Proposed SBA—Access and Phasing ____________________________________________________ 2
2. IMF Financial Arrangements and Fund Exposure, 1984-2026 ___________________________ 4
3. External Debt Structure, 2011-2017 _____________________________________________________ 5
4. Capacity to Repay Indicators __________________________________________________________ 10
5. Impact on GRA Finances ______________________________________________________________ 12
ARGENTINA
INTRODUCTION
1. This note assesses the risks to the Fund arising from the proposed Stand-By
Arrangement (SBA) for Argentina and its effects on the Fund's liquidity, in accordance
with the policy on exceptional access.7 The authorities are requesting a 36-month SBA with
access equivalent to SDR 35.379 billion (1,110 percent of quota). Under the proposed phasing,
access is significantly frontloaded, with a first purchase equivalent to SDR 10.614 billion
(333 percent of quota) available upon approval. The authorities intend to make the first
purchase, using one-half of the Fund resources (SDR 5.307 billion) for budgetary purposes, and
intend to treat the remainder of the arrangement as precautionary. However, in a full-drawdown
scenario, in which real GDP ends up being 8 percent lower than in the precautionary baseline by
2023, the first purchase would be followed by 12 quarterly purchases each equivalent to SDR
2.064 billion (64.8 percent of quota) during the remainder of the arrangement period. By mid-
June 2019, about a year into the arrangement, cumulative available purchases would amount to
SDR 18.869 billion (592.0 percent of quota or 53.3 percent of the proposed access). The final
purchase would become available in June 2021, following the completion of the twelfth review
(Table 1).
Table 1. Argentina: Proposed SBA — Access and Phasing
Percent of quota
Availability Date 1/ SDR millions Purchase Cumulative
2018 June 10,613.71 333.0 333.0

September 2,063.78 64.8 397.8
December 2,063.78 64.8 462.5
2019 March 2,063.78 64.8 527.3
June 2,063.78 64.8 592.0
September 2,063.78 64.8 656.8
December 2,063.78 64.8 721.5
2020 March 2,063.78 64.8 786.3
June 2,063.78 64.8 851.0
September 2,063.78 64.8 915.8
December 2,063.78 64.8 980.5
2021 March 2,063.78 64.8 1045.3
June 2,063.71 64.7 1110.0
Total 35,379.0 1,110.0
Source: Finance Department
1/ After approval of the arrangement, all subsequent purchases will depend on the completion of a review and
compliance with performance criteria and consultation clause to be established under the arrangement.
7
See paragraph 5 of Decision No 14064-(08/18), adopted 2/22/2008, as amended, and The Acting Chair’s Summing
Up of the Review of Access Policy Under the Credit Tranches and the Extended Fund Facility, and Access Policy in
Capital Account Crises—Modifications to the Supplemental Reserve Facility and Follow-Up Issues Related to
Exceptional Access Policy (3/5/03).

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BACKGROUND
2. Argentina had been a prolonged and large user of Fund resources up to the mid-2000s
(Table 2). It had been among the top five borrowers during most of the 1980s and 1990s.
During the 1990s, two SBAs and two arrangements under the Extended Fund Facility (EFF) were
approved in 1991 and 1996, and in 1992 and 1998, respectively. The 1998 EFF was treated as
precautionary, and no drawing was made under it. A successor three-year SBA was approved on
March 10, 2000 for SDR 5.4 billion. Thereafter, the Board approved two requests for
augmentation of access to SDR 16.9 billion, including SDR 6.1 billion under the Supplemental
Reserve Facility (SRF). Only SDR 9.8 billion of the approved SDR 16.9 billion was disbursed by the
time the program was interrupted. The December 2001 program review was not completed and
Argentina declared default on its sovereign debt obligations on December 23, 2001, as the
currency peg collapsed.8 After protracted program discussions in 2002, a transitional SBA was
approved on January 24, 2003, followed by a three-year SBA approved on September 20, 2003
with access equivalent to SDR 9.0 billion. Argentina incurred short-term arrears to the Fund
when it failed to meet a repurchase obligation of SDR 2.9 billion on September 9, 2003.9 This
overdue obligation was cleared on September 11, 2003. On January 4, 2006, Argentina repaid all
its obligations to the Fund and cancelled the 2003 SBA the following day.
3. Argentina’s total external debt-to-GDP has been moderate in recent years, with most
of the debt owed by the public sector (Table 3). From a low level of 27⅓ percent in 2013,
total external debt-to-GDP increased marginally over a two-year period to nearly 28 percent by
end-2015. It increased significantly during 2015–17 while remaining moderate at almost 37
percent of GDP by end-2017, below the median of recent exceptional access cases (Figure 1,
Panel A). Short-term debt represents about one-third of total external debt. Public sector debt
accounts for a large share of Argentina’s external debt (70 percent in 2017). Total external debt
is expected to increase further, to 51 percent of GDP in 2018, reflecting bonds issued earlier this
year and the scheduled first purchase under the proposed SBA (Table 4).
8
In 2003, Argentina decided to restructure its debt starting in 2005. The restructuring process has been protracted.
Since taking office in December 2015, the current administration has sought to settle outstanding claims with holders
of the defaulted bonds. Settlement with most of the holdout creditors in April 2016 allowed for the country to regain
access to international capital markets. According to information made available to staff, Argentina continues to have
outstanding arrears to private creditors and one official bilateral creditor (see the main report).
9
There had been other incidents of Argentina’s short-term overdue obligations to the Fund, mostly in the late 1980s.

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Table 2. Argentina: IMF Financial Arrangements and Fund Exposure, 1984–2026 1/

(In millions of SDR)
Type of New Date of Date of Expiration Amount of New Amount Fund

Year Arrangement Arrangement or Cancellation Arrangement Drawn Exposure 1/
1984 SBA 28-Dec-1984 30-Jun-1986 1,182.5 1,182.5 1,120.6

1985 2,105.1
1986 2,240.8
1987 SBA 23-Jul-1987 30-Sep-1988 947.5 616.5 2,716.2
1988 2,733.0
1989 SBA 10-Nov-1989 31-Mar-1991 736.0 506.0 2,358.8
1990 2,167.2
1991 SBA 29-Jul-1991 31-Mar-1992 780.0 438.8 1,735.9
1992 EFF 31-Mar-1992 30-Mar-1996 4,020.3 4,020.3 1,682.8
1993 2,562.4
1994 2,884.7
1995 4,124.4
1996 SBA 12-Apr-1996 11-Jan-1998 720.0 613.0 4,376.0
1997 4,349.3
1998 EFF 4-Feb-1998 10-Mar-2000 2,080.0 0.0 3,865.1
1999 3,262.6
2000 SBA 2/ 10-Mar-2000 23-Jan-2003 16,936.8 9,756.3 3,880.3
2001 11,121.1
2002 10,547.5
SBA 24-Jan-2003 31-Aug-2003 2,174.50 2,174.5
2003 10,446.2
SBA 20-Sep-2003 5-Jan-2006 8,981.00 4,171.0
2004 9,073.0
2005 6,655.7
2006 0.0
: :
: :
2017 0.0
2018 SBA 20-Jun-2018 19-Jun-2021 35,379.00 14,741.3 3/
2019 22,996.4 3/
2020 31,251.5 3/
2021 32,467.6 3/
2022 23,549.1 3/
2023 13,414.5 3/
2024 5,417.4 3/
2025 773.9 3/
2026 0.0 3/
Source: Finance Department
1/ As of end-December, unless otherwise stated.
2/ The amount reflects also two augmentations including SDR 6.1 billion under the Supplemental Reserve Facility
(SRF).
3/ Figures including transactions under the proposed program are in italics. Fund exposure is derived assuming
purchases are made as per the schedule in Table 1 and Argentina remains current on all its scheduled repurchases.

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Table 3. Argentina: External Debt Structure, 2011–2017 1/

2011 2012 2013 2014 2015 2016 2017
(In Millions of U.S. Dollars)
Total External Debt 167,477 167,960 167,018 170,375 178,933 189,639 235,740
of which:
Public 103,809 103,343 102,973 109,862 113,180 130,228 164,130
Loans 35,441 33,950 33,053 35,643 43,007 40,498 47,358
Multilateral 16,224 16,583 17,661 19,857 19,768 20,230 21,327
Of which IMF 0 0 0 0 0 0 0
Bonds 68,368 69,393 69,921 74,219 70,173 89,730 116,772
Of which Holdouts 11,177 11,482 11,529 11,633 11,521 8,468 2,788
Private 63,668 64,617 64,045 60,513 65,753 59,410 71,610
Loans 55,501 57,379 56,650 52,747 56,037 46,457 55,577
Short-term 49,205 50,870 50,224 46,763 49,680 41,487 48,913
Long-term 6,296 6,509 6,426 5,984 6,357 4,970 6,664
Bonds 8,167 7,238 7,394 7,766 9,716 12,953 16,033
(In Percent of GDP)
Total External Debt 31.7 29.0 27.3 30.2 27.9 34.2 37.0
of which:
Public 19.7 17.8 16.8 19.5 17.6 23.5 25.8
Loans 6.7 5.9 5.4 6.3 6.7 7.3 7.4
Multilateral 3.1 2.9 2.9 3.5 3.1 3.7 3.3
Of which IMF 0.0 0.0 0.0 0.0 0.0 0.0 0.0
IBRD/IDA 0.9 0.8 0.9 1.1 0.9 1.1 1.0
IDB 1.9 1.7 1.7 2.0 1.7 2.1 1.8
Other multilateral 0.3 0.3 0.4 0.4 0.4 0.5 0.5
Bilateral 1.2 0.7 0.8 1.6 1.4 1.4 1.3
Commercial 2.5 2.3 1.7 1.2 2.2 2.2 2.8
Bonds 13.0 12.0 11.4 13.2 10.9 16.2 18.3
Of which Holdouts 2.1 2.0 1.9 2.1 1.8 1.5 0.4
Private 12.0 11.2 10.5 10.8 10.2 10.7 11.2
Loans 10.5 9.9 9.3 9.4 8.7 8.4 8.7
Short-term 9.3 8.8 8.2 8.3 7.7 7.5 7.7
Long-term 1.2 1.1 1.1 1.1 1.0 0.9 1.0
Bonds 1.5 1.2 1.2 1.4 1.5 2.3 2.5
Source: Argentine authorities and IMF staff estimates.

1/ End of year unless otherwise indicated.
4. Argentina’s external debt service is high, reflecting the large share of short-term debt.
As a share of GDP, Argentina’s total external debt service for 2017 is estimated at around 11
percent of which more than 70 percent represents obligations of the private sector. The large
external debt service is almost equivalent to exports of goods and services in 2017, making
Argentina second only to Iceland among recent exceptional access cases (Figure 1, Panel C).
5. Argentina’s public debt is relatively high and is projected to rise further by end-2018.
Over the period 2007–15, the public debt-to-GDP ratio averaged nearly 47½ percent. Reflecting
larger gross financing needs since 2016, public debt increased to nearly 57 percent of GDP by
end-2017. This debt level is 17 percentage points of GDP above the median public debt at the
time of approval of recent exceptional access cases (Figure 1, Panel D). It is projected to increase
further to almost 63½ percent of GDP by end-2018 (Table 4).

6
0
20
40
60
80
100
120
140
0
1,000
1,200
200
400
600
800
ARGENTINA
*Armenia *Armenia
*Mongolia Jordan
Costa Rica Belarus
Belarus Costa Rica
Medi an
*Georgia *Pakistan
Medi an
Jordan *Georgia
Guatemala *Mongolia
El Salvador Argentina
*Sri Lanka Guatemala
*Pakistan Sri Lanka
St. K & N El Salvador
Romania 2009 Romania 2009
Hungary Ukraine 2008
Serbia St. K & N
Latvia Serbia
Ukraine 2014 Romania 2013

Romania 2013 Ukraine 2014
Ukraine 2010 Ukraine 2010
and Services (in percent)

A. Total External Debt

Portugal Hungary
Ukraine 2008 Latvia
Greece SBA Iceland
(in percent of GDP at time of approval)
Ireland Greece SBA
C. External Debt Service to Exports of Goods
Source: Argentine Authorities and IMF staff estimates

Greece EFF Greece EFF
Argentina Portugal
Iceland Ireland
0
20
40
60
80
100
120
140
160
0
50
100
150
200
250
since September 2008. For Argentina, ratios reflect end-2017 data.

Belarus Belarus
Latvia Latvia
2/ Asterisks indicate PRGT-eligible countries at the time of the program.

*Armenia Costa Rica
Medi an
Medi an
Guatemala Guatemala
*Georgia *Armenia
*Mongolia Ukraine 2014
Serbia Serbia
Costa Rica *Georgia
Romania 2011 Jordan
El Salvador El Salvador
Romania 2013 Romania 2013
Ukraine 2014 Argentina
*Pakistan Ukraine 2015
Argentina Romania 2011
Hungary *Pakistan
*Sri Lanka
D. Total Public Debt
Ukraine 2015
B. Public External Debt
Jordan *Mongolia
*Sri Lanka Hungary
Portugal St. K & N
Ireland Portugal
Iceland
Iceland
Greece SBA
Figure 1. Argentina: Debt Ratios for Recent Exceptional Access Arrangements 1/ 2/
Greece SBA
Greece EFF Ireland
St. K & N Greece EFF
1/ Estimates as reported in relevant staff reports on the request of SBAs or arrangements under the EFF approved
ARGENTINA
THE NEW STAND-BY ARRANGEMENT—RISKS AND

IMPACT ON FUND’S FINANCES
H. Risks to the Fund
6. Access under the proposed SBA would exceed both annual and cumulative access
limits and would be among the highest on a number of indicators.
 It would be the largest arrangement in absolute terms, in the Fund’s history, excluding
arrangements under the Flexible Credit Line (FCL).
 After the scheduled first purchase upon approval of the arrangement, Argentina would be the
Fund’s largest borrower, with SDR 10.6 billion credit outstanding (333 percent of quota),
representing 22 percent of total Fund credit outstanding.
 If Argentina did not treat the remainder of the arrangement as precautionary, and all purchases
were made according to the proposed schedule, Argentina’s outstanding use of GRA resources
would rise to 592 percent of quota and 722 percent of quota at end-June 2019 and end-
December 2019, respectively. It would peak at 1,110 percent of quota in June 2021 (Figure 2).
This level of access relative to quota would be almost the same as that of Ukraine 2010 SBA and
would be more than 38 percentage points above the median of peaks in recent exceptional
access cases. It would however be below recent exceptional access peaks in arrangements with
euro area members— Greece, Ireland, Portugal—even if Argentina’s access is scaled by its pre-
14th review quota.
 If all purchases were made in accordance with the proposed schedule, peak Fund exposure to
Argentina would consistently exceed corresponding medians in recent exceptional access cases.
Fund exposure would peak around 83 percent of projected gross international reserves, which is
over twice as high as the 39 percent median peak of recent exceptional access cases.10 As a
share of total external debt, peak Fund exposure would be 14 percent, compared with 11
percent which is the median peak of recent exceptional access cases. As a share of GDP, peak
Fund exposure would be 8.4 percent, compared with 10.4 percent, which is the median peak of
recent exceptional access cases (Table 4 and Figure 3).
 If all purchases were made in accordance with the proposed schedule, projected payment
obligations to the Fund would peak in 2023 at SDR 11 billion, representing almost 18 percent of
projected gross international reserves. Debt service to the Fund as a share of exports of goods
and services would peak at about 15 percent, twice the median peak level for recent exceptional
10
The computation of the median of peak Fund exposure in percent of gross international reserves excludes
arrangements with members belonging to the euro area at the time of the approval of the arrangement: Greece,
Ireland, and Portugal.

ARGENTINA
access cases. Total external debt service as a share of projected exports of goods and services is
projected to peak at 178 percent, which is the highest ratio of external debt service to exports
among recent exceptional access cases (Table 4 and Figure 3).
Figure 2. Credit Outstanding in the GRA around Peak Borrowing 1/

(In percent of quota)
Approved Exceptional Access Cases since September 2008 2/
3,500
Highest (Greece SBA)

3,000
Median = 801
2,500
Greece EFF
2,000 Argentina
(pre-14th Review quota)
Ireland
Portugal
1,500
Argentina
Ukraine 2010
Romania
1,000
Ukraine 2015
500 Ukraine 2008
Ukraine 2014
Lowest (Mongolia)
0
t-36 t-30 t-24 t-18 t-12 t-6 t t+6 t+12 t+18 t+24 t+30 t+36 t+42 t+48 t+54 t+60 t+66 t+72
Source: Finance Department and IMF staff estimates.

1/ Peak borrowing “t” is defined as the highlest level of credit outstanding for a member. Repurchases are
assumed to be on an obligations basis.
2/ Based on quotas at the time of approval, i.e., pre-14th Review quotas for all countries except Argentina. Median
credit outstanding at peak is 802 percent of quota; average is 1,041 percent of quota.

0
5
10
15
20
25
30
35
40
45
50
0
5
10
15
20
0
10
20
30
40
50
60
70
80
90
Ireland Guatemala
Latvia Costa Rica
El Salvador
Portugal Guatemala Romania 2013
Guatemala Romania 2013
Medi an
*Georgia
Median
Medi an
Greece SBA Jordan Jordan
Romania 2013 *Mongolia *Mongolia
Costa Rica El Salvador *Pakistan
El Salvador Belarus
Serbia 2009
Hungary *Sri Lanka
Greece EFF Latvia
Latvia
Serbia 2009 Romania 2011 Argentina
Ukraine 2014 Iceland *Armenia
Iceland Romania 2009 Serbia 2009
approved since September 2008.

*Mongolia *Georgia Romania 2009
*Sri Lanka Ukraine 2008 Ukraine 2014
Ukraine 2015 Ukraine 2010 Hungary
Argentina Ukraine 2008
A. In Percent of GDP
Hungary Romania 2011

Romania 2011
E. In Percent of Total External Debt

Belarus Belarus Greece SBA
Romania 2009 St. K & N St. K & N
Peak Fund Exposure Ratios
*Pakistan *Armenia Ireland

Ukraine 2010
C. In Percent of Gross International Reserves

*Georgia *Sri Lanka Portugal
*Armenia Costa Rica
*Pakistan Greece EFF
Jordan Ukraine 2015
St. K & N Iceland
Argentina Ukraine 2015
0
5
10
15
20
0
20
40
60
80
100
120
140
160
180
200
0
10
20
30
40
50
60
70
80
*Mongolia *Mongolia
Ireland Ireland
Latvia *Georgia
Costa Rica Jordan
Romania 2013 Belarus
2/ Asterisks indicate PRGT-eligible countries at the time of the program.

Medi an
Portugal Belarus
Medi an
Medi an
Jordan
Exceptional Access Cases 1/ 2/
Argentina Ukraine 2015 Costa Rica

Greece EFF Guatemala Guatemala
Ukraine 2015 El Salvador El Salvador
Romania 2011 Hungary *Sri Lanka
Hungary Portugal *Pakistan
Serbia 2009 *Georgia St. K & N
Source: Argentine authorities and IMF staff estimates, and World Economic Outlook.
Iceland Latvia Romania 2009
Ukraine 2010 Ukraine 2010 Hungary
Greece SBA Ukraine 2014 Ukraine 2015
Costa Rica Romania 2013 Ukraine 2014
Romania 2009 Ukraine 2008 Ukraine 2010
Debt Service
Ukraine 2014 *Sri Lanka Portugal
Goods and Services
Guatemala Romania 2011

Goods and Services
Figure 3. Peak Fund Exposure and Debt Service Ratios for Recent
Serbia 2009
Belarus Romania 2009
Iceland Romania 2011
*Mongolia
Peak Debt Service Ratios
Jordan Serbia 2009 Ireland

*Pakistan St. K & N Latvia
1/ Estimates as reported in relevant staff reports on the request of SBAs or arrangements under the EFF
*Sri Lanka *Armenia Romania 2013
El Salvador Argentina Greece SBA
Greece EFF
D. Debt Service to the Fund in Percent of Exports of
St. K & N *Pakistan

F. Debt Service to the Fund in Percent of Total External
B. Total External Debt Service in Percent of Exports of
*Georgia Greece SBA Iceland

*Armenia Greece EFF Argentina
9
ARGENTINA
10
Table 4. Argentina—Capacity to Repay Indicators 1/

ARGENTINA
2018 2019 2020 2021 2022 2023 2024 2025 2026
Exposure and Repayments (In SDR millions)

GRA credit to Argentina 14,741.3 22,996.4 31,251.5 32,467.6 23,549.1 13,414.5 5,417.4 773.9 0.0
(In percent of quota) (462.5) (721.5) (980.5) (1,018.7) (738.8) (420.9) (170.0) (24.3) (0.0)
Charges due on GRA credit 2/ 196.3 589.6 915.8 1,313.6 1,330.4 844.7 381.8 83.6 10.2
Debt service due on GRA credit 3/ 196.3 589.6 915.8 4,225.0 10,248.9 10,979.3 8,378.9 4,727.1 784.1
Debt and Debt Service Ratios 4/
In percent of GDP
External debt, public 36.8 43.1 45.3 45.0 47.3 49.0 51.1 53.1 55.3
GRA credit to Argentina 4.0 6.4 8.4 8.0 5.7 3.1 1.2 0.2 0.0
Total external debt service 15.6 18.4 20.4 21.6 23.8 25.2 27.4 29.4 31.7
Public external debt service 8.4 10.0 11.3 12.0 13.1 14.0 15.1 16.2 17.5
Debt service due on GRA credit 0.1 0.2 0.2 1.0 2.5 2.6 1.9 1.0 0.2
In percent of Gross International Reserves
External debt, public 362.0 412.2 450.4 459.5 384.8 342.1 295.1 258.4 224.6
In percent of Exports of Goods and Services
Total external debt service 105.5 112.1 124.6 134.5 143.1 150.1 159.2 168.0 177.7
Public external debt service 57.0 61.1 68.9 74.9 79.2 83.1 88.1 92.9 98.3
In percent of Total External Debt
In percent of Total External Debt Service
In percent of Total Public External Debt

In percent of Total Public External Debt Service
Source: Argentine authorities, Finance Department, and IMF staff estimates.

1/ Assumes full drawings and indicators based on the adverse macroeconomic scenario presented in the staff report.
2/ Includes GRA basic rate of charge, surcharges, service fees, and SDR charges. Of the 2018 figure, SDR 195.4 million is for the period subsequent to
the Executive Board discussion of the staff report for the request of the proposed SBA.
3/ Includes charges due on GRA credit and repurchases. Of the 2018 figure, SDR 195.4 million is for period subsequent to the Executive Board
discussion of the staff report for the request of the proposed SBA.
4/ Staff projections for external debt, GDP, gross international reserves, and exports of goods and services, are based on the adverse scenario in the
staff report for the request of the proposed SBA up to 2023 and extended to 2026.
ARGENTINA
I. Impact on the Fund’s Liquidity Position and Risk Exposure
7. The proposed SBA arrangement would have a significant impact on the Fund’s
liquidity and on the Fund’s credit risk exposure.
 The proposed arrangement would reduce the Fund’s liquidity by 16.0 percent (Table 5). It
would reduce the one-year forward commitment capacity (FCC) from SDR 222 billion as of
June 7, 2018 to SDR 186 billion.
 After Argentina’s scheduled first purchase under the proposed arrangement, the Fund’s
exposure to the top five borrowers would decline marginally (Table 5). The share of the top
five borrowers amounts to 77.9 percent. After Argentina’s scheduled first purchase, its
share of outstanding GRA credit would be 22.1 percent and the share of the top five
borrowers would fall to 74.8 percent (Figure 6).11
 GRA exposure to Argentina would exceed the Fund’s current level of precautionary
balances (Table 5). The GRA commitment to Argentina amounts to nearly twice the current
level of precautionary balances. If all purchases are made as scheduled, Fund exposure to
Argentina as a share of the current level of precautionary balances would rise from 61
percent after the first purchase is made to 132 percent by end-2019 and would peak at
203 percent in June 2021 (assuming the current level of precautionary balances).
 Were Argentina to accrue arrears on charges after drawing under the proposed
arrangement, the Fund’s burden sharing mechanism would be clearly insufficient. In the
current environment of relatively low interest rates, GRA charges for Argentina, which are
projected at SDR 194 million for the remainder of 2018, and to average SDR 894 million a
year over 2019–2024 if all purchases are made as scheduled, significantly exceed the
Fund’s limited current capacity to absorb charges in arrears through the burden sharing
mechanism.
11
The decline in the share of the top five borrowers is due to the impact of Argentina’s large scheduled first
purchase on total credit outstanding.

ARGENTINA
Table 5. Argentina—Impact on GRA Finances

(millions of SDR unless otherwise noted)
As of 6/7/2018
Liquidity measures
Current one-year Forward Commitment Capacity (FCC) 1/ 221,590.8
Impact on FCC on approval 2/ -35,379.0
(in percent of current one-year FCC) -16.0
Prudential measures
Fund GRA credit outstanding to Argentina 3/ 10,613.7
In percent of current precautionary balances 4/ 61.0
In percent of total GRA credit outstanding 22.1
Fund GRA credit outstanding to top five borrowers

In percent of total GRA credit outstanding 77.9
In percent of total GRA credit outstanding including Argentina's first purchase 74.8
Argentina's annual GRA charges in percent of Fund's residual burden sharing capacity for 2018 180.2
Memorandum items
Fund's precautionary balances (FY 2018) 17,400
Fund's residual burden-sharing capacity 4/ 107.8
Sources: Argentine authorities, Finance Department, and IMF staff estimates.
1/ The FCC is defined as the Fund's stock of usable resources less undrawn balances under existing arrangements,
plus projected repurchases during the coming 12 months, less repayments of borrowing due one year forward,
less a prudential balance. The FCC does not include resources under the New Arrangements to Borrow or 2016
Bilateral Borrowings Agreements.
2/ A single country's negative impact on the FCC is defined as the country's sum of Fund credit and undrawn
commitments minus repurchases one-year forward.
3/ Projected credit outstanding for Argentina at time of approval of the proposed arrangement, which amounts to
the scheduled first purchase.
4/ Burden-sharing capacity is calculated based on the floor for remuneration which, under current policies, is
85 percent of the SDR interest rate. Residual burden-sharing capacity is equal to the total burden-sharing capacity
minus the portion being utilized to offset deferred charges.

ARGENTINA
Figure 4. Exceptional Access Levels and Credit Concentration

A. Total Access of Recent Exceptional Access Arrangements 1/
(In billions of SDRs)
40
35
30
25
20
15
10
0
Sri Lanka
Argentina
Latvia
Serbia
Hungary
Ukraine 2010
Ukraine 2014
Ukraine 2008
Ukraine 2015
*Georgia
Ireland
Greece EFF
*Pakistan
Portugal
Greece SBA
Iceland
Jordan
Belarus
Romania 2013
Romania 2011
Romania 2009
Source: Finance Department.
1/ Does not include FCL arrangements as well as arrangements with relatively low access in SDRs. Asterisks
indicate countries that were PRGT-Eligible at the time of approval.
2/ Total credit outstanding refers to credit outstanding as of June 7, 2018 plus Argentina’s first purchase
under the proposed arrangement.

ARGENTINA
ASSESSMENT
8. The proposed SBA for Argentina is intended to support the authorities’ economic
program during a period of macroeconomic adjustment to reduce vulnerabilities and
promote strong, sustainable, and inclusive growth. The success of the program will
depend critically on the acceleration of fiscal consolidation to restore credibility of the
authorities’ reforms and boost market confidence. Against the backdrop of the long and
sometimes controversial history of Fund program engagement in Argentina, building a
broad consensus on the objectives of the program and the associated policies would be
critical to ensure the political sustainability of the program and maintain the
implementation momentum needed for the program to succeed.
9. The program faces substantial risks. As highlighted in the staff report and in the
debt sustainability analysis, gross financing needs and debt vulnerabilities are expected to
remain high. The debt trajectory is sensitive to deviations from program assumptions, in
particular for the exchange rate, economic growth, and fiscal adjustment paths. If key
policies or program assumptions do not materialize, the stabilization of Argentina’s
economy would be undermined, with the likelihood that gross financing needs will
increase and debt would follow an upward trajectory:
 There is a risk that domestic support for the policies and reform measures underpinning
the program would not be sustained notwithstanding measures aimed at protecting the
most vulnerable from the burden of adjustment.
 If the envisaged fiscal adjustment is not realized, there would be a deterioration in market
confidence that could fuel a sell-off of Argentine assets, curtail access to new private
financing, and trigger significant pressures on the exchange rate as observed in the run-up
to the initiation of discussions on the proposed arrangement.
 An even less favorable macroeconomic framework relative to the full-drawing scenario

could pose serious risks to debt sustainability and exacerbate Argentina’s already high
burden of debt service. Such a scenario could result from policy slippages that erode
market confidence, lingering crisis of confidence that constrain Argentina’s access to
capital markets more than assumed in the adverse scenario discussed in the staff report,
unfavorable external conditions such as weaker growth in trading partner countries that
subdues exports, a deterioration of its terms of trade, tighter-than-expected global
financing conditions, or a combination of adverse factors.
10. The steadfast implementation of the program will be critical. With the proposed
access and schedule of purchases and repurchases, the Fund would be highly exposed to
Argentina for an extended period in terms of both the stock of outstanding credit and
debt service falling due. Reflecting the proposed frontloaded access, Argentina would
become the Fund’s top borrower soon after approval of the proposed SBA. The Fund’s

ARGENTINA
exposure to Argentina would be significant and increase thereafter with each purchase, if
made, exceeding the Fund’s precautionary balances for several years to come. Also,
scheduled repayments to the Fund are large during 2022–25, with a peak of SDR 10.98
billion (almost 344 percent of quota) in 2023. The experience with Argentina’s 2003 SBA-
supported program highlights the importance of sustaining broad political support for
reforms. The authorities’ ability to garner such support and their readiness to recalibrate
their policies in reaction to potential adverse shocks would be crucial to help stabilize the
economy and facilitate sustained meaningful market access and financing by other official
lenders during the program period and beyond. This is key to reduce financial risks to the
Fund arising from the proposed arrangement.
11. The proposed arrangement will have a significant, though manageable, impact
on the Fund’s liquidity. On approval of the arrangement, the Fund’s liquidity would be
reduced by the full amount of the proposed access, which is the largest ever in absolute
size for a Fund arrangement (except for some arrangements under the FCL). While the
Fund’s liquidity position would remain adequate, the current uncertainties in the global
economy could result in further demands for Fund resources. Therefore, a close
monitoring of the Fund’s liquidity position is warranted.

ARGENTINA
REQUEST FOR STAND-BY ARRANGEMENT –
June 19, 2018 SUPPLEMENTARY INFORMATION, SUPPLEMENTARY
LETTER OF INTENT, AND AMENDMENT TO THE
TECHNICAL MEMORANDUM OF UNDERSTANDING
Approved By Prepared by the Argentina team

Nigel Chalk (WHD)
and Daria Zakharova
(SPR)
1. This supplement provides additional information that has become

available since the Staff Report (EBS/18/53) was circulated to the Executive Board
on June 13, 2018. The information does not alter the thrust of the staff appraisal.
2. In efforts to institutionalize exchange rate flexibility, the authorities have

announced the introduction of a multiple-price auction to buy and sell foreign
exchange (FX). The introduction of an FX auction is in line with IMF staff
recommendations. All domestic banks will have access to the auction and FX will be
allocated solely based on the rates proposed by auction participants to ensure full
arbitrage opportunity between the auction and the rest of the FX market. Auctions will
be conducted for a period of no more than 12 months.
3. The multiple price auction gives rise to a multiple currency practice (MCP)
subject to Fund approval under Article VIII, Section 3 of the Articles of Agreement.
In the absence of a mechanism that would prevent (i) a spread deviation of more than 2
percent in the exchange rates at which the BCRA sells foreign exchange to successful
bidders; and (ii) a spread deviation of more than 2 percent between the auction rates
and the market exchange rate, the auction results in an MCP.
4. The authorities have requested Fund approval for the retention of the
multiple currency practice. Staff supports the Executive Board’s approval of the
multiple price auction, which is maintained for non-balance of payment reasons, given
that it is temporary (i.e., limited in duration to no more than 12 months), does not harm
the interest of other members and does not discriminate between Fund members. A
decision is proposed to this effect for consideration of the Executive Board. The
Technical Memorandum of Understanding has also been amended to carve-out from
the continuous performance criterion on introduction or modification of multiple-
currency practices any modification to this foreign exchange auction.
ARGENTINA
Appendix I. Supplementary Letter of Intent
June 18, 2018
Madame Christine Lagarde

Managing Director
Washington, D.C. 20431
United States of America
Dear Madame Lagarde:
The attached Memorandum of Economic and Financial Policies (MEFP) describes the economic
objectives and policies of the Government of Argentina for 2018 and beyond. Also attached is a
Technical Memorandum of Understanding that sets out the specific objectives that we are
committed to achieving under the IMF arrangement in support of our economic plan.
The Argentine government requests the IMF’s support for this policy program. It is a plan that
has been designed by the Argentine government in a way that we judge best fits our current
political, economic and social situation.
As part of that support, we are formally requesting an IMF Stand-By Arrangement for a period of
36 months, in the amount of SDR 35,379 million (equivalent to around US$ 50 billion, or 1,110
percent of Argentina’s quota with the IMF). We plan to draw the first tranche (US$ 15 billion)
upon approval of the arrangement, half of which will be used as budget support, while treating
the remaining of the arrangement as precautionary.
We consider that the plan that we have designed is strong and will help build confidence, reduce
uncertainties and strengthen Argentina’s economic prospects.
Importantly, we are committed to ensuring that the burden of the needed recalibration of the
fiscal policy is shared fairly and that the most vulnerable segments of Argentina’s population are
fully protected. Under our program we intend to protect our spending on social assistance and,
in the unlikely event that social conditions deteriorate, we are committed to identifying
additional resources to increase the funding of our most effective social assistance programs.
Consistent with the priorities of President Macri’s administration, included in our G20 agenda, we
also intend to use this opportunity to take important steps to address long-standing gender
inequities that are embedded in the Argentine economic system. One of our goals for this
program is to ensure that women are treated equitably and are afforded the economic
opportunities that they are entitled to. We especially seek your personal backing in this matter.

ARGENTINA
In sum, we ask that the IMF stands with Argentina through this more challenging international
environment. We view the objectives of the plan described in the attachments as mileposts that
should be used in the design of the requested Stand-By Arrangement.
To demonstrate our commitment to this plan, on June 7 we announced our intention to

accelerate the convergence to a primary fiscal balance and to lower inflation within a more
consistent and institutionally sound monetary policy framework.
We believe that these policies and those set forth in the attached MEFP are adequate to achieve
the macroeconomic and financial objectives of the program. But we will take any additional
measures that may be appropriate for this purpose. We will consult with the IMF on the adoption
of these measures, and in advance of revisions to the policies contained in the MEFP, in
accordance with the IMF’s policies on such consultation.
We remain, of course, committed to maintaining the usual close policy dialogue with IMF staff
and to providing IMF staff with the data and information it requests for the purpose of
monitoring program implementation. Reaffirming our commitment to transparency, we consent
to the IMF’s publication of this letter, the MEFP, the Technical Memorandum of Understanding,
and the accompanying Executive Board documents.
We trust that we can count on your support.
Yours sincerely,
/s/ /s/
Nicolas Dujovne Luis Caputo
Minister of the Treasury President, Central Bank of Argentina
Attachments (2)

ARGENTINA
Attachment II. Amendment to the Technical Memorandum of

Understanding
To account for the impact of the recently announced introduction of a multiple price foreign
exchange auction, an addendum will be added to the June 2018 TMU that will read as follows:
Performance Criterion on the Introduction or Modification of Multiple Currency Practices

The performance criterion on the introduction or modification of multiple currency practices (MCP)
excludes multiple currency practices arising from any modification to the multiple-price foreign
exchange auction system introduced in June 2018.

Statement by the Staff Representative on Argentina
June 20, 2018
This statement provides additional information that has become available since the
Staff Report (EBS/18/53) was circulated to the Executive Board on June 13, 2018. The
information does not alter the thrust of the staff appraisal.
Pressures on the FX have intensified since the Staff Report was sent to the Board. On
Thursday June 14, the peso depreciated by 6.5 percent, at the end of a day where markets
operated with very low levels of liquidity and without any intervention of the BCRA.
On the evening of Thursday June 14, the Governor of the Central Bank, Federico
Sturzenegger, resigned, and was replaced by the Finance Minister, Luis Caputo.
Sturzenegger motivated his decision with the loss of confidence in his stewardship by the
markets. Together with Sturzenegger, other key members of the Monetary Policy Committee
presented their resignation. The Finance Ministry will be reabsorbed into the Treasury. The
Minister of Energy and the Minister of Production were also replaced.
On Monday, June 18, the authorities announced a series of measures to help stabilize
FX markets. The measures aimed at absorbing liquidity and reducing the risk of a disorderly
auction of the LEBACs, scheduled for Tuesday June 19. They included:
 Increasing the reserve requirements by 3 percentage points on June 21 (and a further

2 percentage points on July 18). The incremental part of this reserve requirement
could be satisfied through holdings of fixed rate, peso Treasury bonds maturing in
2020.
 Relaxing the restrictions on banks’ ability to purchase US$-denominated, domestic

law debt in the secondary market.
 Reducing the limit on banks’ net open FX position from 10 to 5 percent of regulatory
capital. However, an additional 25 percent of regulatory capital could be held in these
US$-denominated Treasury instruments.
 Announcing the mechanism (although not the volumes) for the central bank to
auction the Treasury’s FX holdings (arising from Fund budget support), based on a
multiple-price auction set to begin on Thursday of this week.
 Announcing a process (but without an indication of volumes) for central bank

auctions of foreign currency, to be implemented after market close, in cases where
there are clear signs of market dysfunction (in terms of bid-ask spread, market
volumes, or intraday volatility). An after trading-hours FX intervention, such as this
one, is a highly unusual practice and possibly could prejudice price discovery during
the trading day.
2
 Announcing the intention to auction FX for an amount up to US$ 400 million, only
on Monday and Tuesday of this week, based on a multiple price auction that would
take place after market close.
The measures contributed to stabilize the peso. The peso appreciated about 2 percent on
Monday and was relatively stable on Tuesday, two days with still relatively low traded
volumes. After market closed on Monday, the central bank sold US$ 175mn at a rate of
AR$ 27.5, slightly more appreciated than the market close. The bank did not sell any FX on
Tuesday.
The authorities also successfully issued USD 4 billion equivalent in peso bonds on
Monday, although at relatively high rates. Treasury placed US$ 2 billion equivalent in a
28-month peso bonds (at a yield of 27.7 percent) and another US$ 2 billion (1.7 of which in
US dollars) in a 12- month dual currency bond (that gives the investor a choice between a
US$ yield of 4.5 percent or peso yield of 33 percent). The revenues from the issuance would
finance the buyback of non-marketable, low interest, Treasury papers held by the BCRA.
This would in turn allow the BCRA to roll off LEBACs by an equivalent amount.
Equity and bond markets have been suffering heavy losses over the past few days. The
stock market lost 4½ percent since last week with a pronounced decline in utility companies
and banks. The equity markets were affected by both political uncertainty (including the
changes in the cabinet) and reports that Argentina would not be included as part of the MSCI
emerging market index. The EMBI spread has increased by around 70 bps over the last week
and reached its highest level (590 bps) since 2015. Bonds prices have also fallen since last
Wednesday, (by about 1½ percent for 3-year US dollar denominated bonds).
On Tuesday, the BCRA completed its monthly LEBAC auction. With the peso equivalent
of US$ 18.5 billion in LEBAC coming to maturity on Thursday, the BCRA accepted offers
for a total of US$ 11.5 billion, with a cut-off interest rate of 47% for the 1-month bills.

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IMF Country Report No.

• A Press Release including a statement by the Chair of the Executive Board.

• A Staff Supplement updating information on recent developments.

• A Staff Statement updating information on recent developments.

The documents listed below have been or will be separately released.

Letter of Intent sent to the IMF by the authorities of Argentina*

Copies of this report are available to the public from

International Monetary Fund • Publication Services

International Monetary Fund

© 2018 International Monetary Fund

Recent economic developments

• Restore market confidence. The government has committed to a clear macroeconomic

(Annual percentage changes unless otherwise indicated)

(Percent of GDP unless otherwise indicated)

Money and credit

 Restore market confidence. The government has committed to a clear

throughout the course of the arrangement even if there were to be a slower-than-

 Strengthen the credibility of the central bank’s inflation targeting framework.

2 INTERNATIONAL MONETARY FUND

Approved By: A mission team undertook discussions in Washington, D.C. from

ECONOMIC AND POLITICAL CONTEXT __________________________________________________________ 5

MARKET VOLATILITY _____________________________________________________________________________ 6

A MORE ACCELERATED FISCAL PATH _________________________________________________________ 10

PROTECTIONS FOR THE MOST VULNERABLE _________________________________________________ 13

SUPPORTING GENDER EQUITY ________________________________________________________________ 15

MONETARY FRAMEWORK UNDERPINNING THE PROGRAM ________________________________ 16

THE BANKING SYSTEM _________________________________________________________________________ 19

MACROECONOMIC FRAMEWORK AND RISKS ________________________________________________ 20

AN ADVERSE SCENARIO _______________________________________________________________________ 23

PROGRAM MODALITIES ________________________________________________________________________ 27

EXCEPTIONAL ACCESS CRITERIA ______________________________________________________________ 31

STAFF APPRAISAL ______________________________________________________________________________ 33

INTERNATIONAL MONETARY FUND 3

4. Summary Balance of Payments, 2014–23 ______________________________________________________ 36

4 INTERNATIONAL MONETARY FUND

ECONOMIC AND POLITICAL CONTEXT

4. To maintain social consensus the government undertook many of these policy

INTERNATIONAL MONETARY FUND 5

 Second-round effects from the normalization of utility tariffs, an insufficient countervailing

6 INTERNATIONAL MONETARY FUND

 A domestic drought is expected to

INTERNATIONAL MONETARY FUND 7

LEBAC Yield Curve, 2018 Interest Rates

 A widening of the corridor around the policy rate.

8 INTERNATIONAL MONETARY FUND

7. On May 8, amid continued volatility Exchange Rate

bank sold US$1.2 billion, and interest rates 18

accumulation of external assets has

9. Following the announcement of staff-level agreement on an exceptional access

INTERNATIONAL MONETARY FUND 9

Argentina Sovereign Curve, 2018 Argentina Sovereign Curve, 2018

A MORE ACCELERATED FISCAL PATH

 Delaying implementation of parts of the recently-passed tax reform to 2020 as a means to

 Further reducing inefficient subsidies for energy and transportation.

10 INTERNATIONAL MONETARY FUND

 Cutting transfers to state-owned enterprises by a total of 15 percent by 2019, combined with

 Scaling back tax expenditures linked to the corporate income tax.

INTERNATIONAL MONETARY FUND 11

Summary of Identified Fiscal Measures