IMF completes third Argentine review, opens way for release of funds Argentina review completed

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The IMF Executive Board completed the third review under the Stand-By credit for Argentina on May 21, approving a strengthened policy program. Completion of this review opens the way for the release of a further SDR 976 million (about $1.2 billion) from the credit, of which SDR 211.7 million (about $267 million) is available under the Supplemental Reserve Facility (SRF).

The full text of News Brief No. 01/44, dated May 21, is available on the IMF's website (www.imf.org).

Background

Argentina's Stand-By credit was first approved on March 10, 2000, for an amount equivalent to SDR 5.4 billion (about $6.8 billion-see Press Release No. 00/17). In January 2001, the Executive Board approved an augmentation of the credit to SDR 10.6 billion (about $13.4 billion), with SDR 2.1 billion (about $2.6 billion) of the augmented total provided under the SRF (see Press Release No. 01/3). So far, Argentina has drawn a total of SDR 3.8 billion (about $4.8 billion) from the IMF under this Stand-By credit.

Köhler welcomes reformulated program

Commenting on the Executive Board discussion, IMF Managing Director Horst Köhler, said: "The IMF welcomes the reformulation of the program proposed by the government of Argentina.

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Continued strong implementation of the program should restore macroeconomic stability and address important structural impediments to a recovery of investment and output.

"Argentina's program aims at strengthening confidence through fiscal consolidation to achieve the program's targets for 2001 and fiscal balance by 2005, while promoting the recovery of investment and output through fiscal incentives and regulatory changes. Firm implementation of the program is needed to initiate a virtuous circle of stronger public finances, lower interest rates, and a recovery of economic activity. In this regard, it is essential that tax compliance be improved and that expenditures be contained, in accordance with the commitments under the federal pact of December 2000.

"The IMF recognizes that some policy measures, while essential in the circumstances, would be distortionary if maintained for a long period. Therefore, the IMF welcomes the commitment that the financial transaction tax and the trade tariff increases will be temporary. It also commends the authorities'...