PR21/401

IMF Executive Board Discusses the Ex-Post Evaluation of

Argentina’s Exceptional Access Under the 2018 Stand-By
Arrangement
FOR IMMEDIATE RELEASE

Washington, DC – December 22, 2021: The Executive Board of the International Monetary
Fund (IMF) met today to discuss the Ex-Post Evaluation (EPE) of Argentina’s Exceptional
Access Under the 2018 Stand-By Arrangement.

An Ex-Post Evaluation is required in all cases of IMF lending above normal borrowing limits to
review perf ormance against original program objectives, discuss whether the program design
was appropriate, and assess whether the program was consistent with Fund policies. This
EPE reviews the experience under Argentina’s program, supported by the Stand-By
Arrangement, and covers the period from June 2018 through to August 2019. It examines
weaknesses and vulnerabilities of the Argentine economy, objectives and policies under the
program, the balance of financing and adjustment, and the justifications for exceptional access
to IMF f inancing by Argentina. The EPE also includes an appendix laying out the authorities’
reaction to the report and views on the 2018 Stand-By Arrangement.

In early 2018, Argentina, like other emerging market economies, was experiencing challenging
external f inancing conditions. The government announced in May 2018 that it would seek an
IMF arrangement. In support of an economic program, the Executive Board approved in June
2018 the largest stand-by arrangement in the Fund’s history. After an augmentation in October
2018, access under the arrangement amounted to US$57 billion (1,227 percent of Argentina’s
IMF quota).

The program aimed to restore confidence, reduce balance of payments and fiscal imbalances,
and bring down inflation. Restoring confidence would, in turn, allow time for the authorities to
return to dealing with longer-term challenges facing the Argentine economy. The strategy,
underpinned by the large financial support from the Fund, centered on fiscal and monetary
tightening, combined with targeted structural reforms, to catalyze renewed capital inflows. The
program also included specific measures to support vulnerable segments of the population
and to address gender inequality.

The Ex-Post Evaluation report concludes that relevant Fund policies and procedures,
including those relating to financing, safeguards and program design, were adhered to. The
report also finds that the program did not deliver on its objectives, despite significant
modifications of economic policies. Mounting redemptions, along with capital flight by
residents, put considerable pressure on the exchange rate. Despite FX interventions beyond
program provisions, the exchange rate continued to depreciate, increasing inflation and the
peso value of public debt, and weakening real incomes, especially of the poor. In sum, the
report concludes that the program did not fulfil the objectives of restoring confidence in fiscal
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and external viability while fostering economic growth. The program went off track in August
2019 with only f our of the planned twelve reviews completed by the Executive Board. The
authorities decided to cancel the arrangement on July 24, 2020.

Executive Board Assessment1

Executive Directors welcomed the comprehensive ex-post evaluation (EPE) of exceptional

access to Fund financing under the 2018 Stand-By Arrangement (SBA) with Argentina. While
the EPE draws a number of important lessons, they noted that several of them are not new.
Looking ahead, Directors emphasized that the EPE findings should inform the ongoing
discussions on a potential follow-up program with Argentina.

Directors regretted that the 2018 program did not deliver on its objectives of restoring market
conf idence, bringing down external and fiscal imbalances, reducing inflation, and protecting
the most vulnerable segments of the population. They considered that the program’s strategy
and conditionality was not sufficiently robust to address Argentina’s deep-seated structural
problems, including fragile public finances, dollarization, high inflation, weak monetary policy
transmission, a small domestic financial sector, and a narrow export base.

Directors noted that the then government’s redlines on certain policies may have ruled out
potentially critical measures for the program. Among those measures were a debt operation
and use of capital flow management measures. A number of Directors, however, questioned
the f easibility of implementing these measures when a key objective of the program was to
restore market confidence. Directors recognized that the emphasis on government ownership
may have also led to overly optimistic forecasts, which weakened the program’s robustness.

Directors noted that the SBA has created substantial financial and reputational risks to the
Fund. Most Directors concurred that agreeing with the authorities upfront on contingency
plans could have reduced risks to the program and to the Fund, but a few Directors noted the
dif ficulties of handling such plans in practice given market sensitivities. Directors emphasized
that better communication by the authorities could have boosted the catalytic effect of the
program. They also underscored that greater burden sharing with other official creditors would
have provided additional financing and signaled broader support from the international
community, both of which could have bolstered confidence.

Directors generally agreed that the SBA was consistent with Fund policies and procedures but
recognized that the application of some of these policies involved considerable judgment. A
f ew Directors, however, questioned such consistency. While standard procedures to assess
risks to the Fund were f ollowed, Directors considered that broader risks could have featured
more prominently, and the Board could have been involved earlier and more deeply in the
process. Many Directors considered that an evaluation of the 2018 SBA with Argentina by the
Independent Evaluation Office could complement the EPE findings. While the revised
Exceptional Access Framework was followed, they noted that the application of the criteria on
debt sustainability, market access, and capacity to implement the program was not
straightforward and came down to finely balanced judgments.

Directors highlighted several lessons for Fund -supported programs. First, it is essential that
they incorporate realistic assumptions. Second, programs should be tailored to country
circumstances, including political economy considerations, which could entail using

1
At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors,
and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here:
http://www.IMF.org/external/np/sec/misc/qualifiers.htm.
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unconventional measures if standard macroeconomic policies are unlikely to deliver. Third, the
analysis of risks underlying key judgments made when applying the Exceptional Access
Framework should be clearly laid out and communicated to the Board. Fourth, ownership,
which should be understood in a broader societal sense, should not preclude a candid
assessment of possible better policy choices and program outcomes. Fifth, effective external
communication is essential in securing proper buy-in at different levels and the intended
catalytic effect. Finally, an appropriate burden sharing is needed when entering into
exceptional access arrangements.