Argentina-IMF Agreement June 2018

The program

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• Argentinean authorities and the IMF reached on a 36-month Stand-By Arrangement

amounting to USD 50.000 millions

• This program will allow us to navigate the financial challenges ahead minimizing the

impact on domestic economic activity

• Argentina presented the economic program to be implemented throughout the

duration of the Stand-By Arrangement

• The economic program is sustainable and consistent in many dimensions: economic,

social and political

• By the first time in history, the program includes a provision to allow additional

spending of up 0.2% of GDP to be deployed in the event that social conditions

worsen

Main goals

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1. Reduce primary deficit to 1.3% of GDP in 2019 and achieve primary fiscal balance in

2020

2. Reinforce BCRA’s autonomy

a) Give the BCRA the authority to set, in consultation with the Ministry of the

Treasury, the inflation targets for the next three years

b) No transfers from the BCRA to the Treasury

c) Provide the BCRA with a solid balance sheet

Repurchase non-marketable government securities held by the BCRA

Reduce the stock of LEBAC securities

d) Submit to Congress a new charter for the BCRA

What brought us here?

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• We inherited an economy full of macroeconomic imbalances and a third of

the population living in poverty

• To protect the most vulnerable we undertook a gradual reduction of the

deficit

• Gradualism needs funds

• Financial turmoil together with an important drought in the productive

region of the country left the country in a fragile situation

• We resorted to the IMF quickly in order to reduce the impact of those

shocks on domestic economic activity

What is to come

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• This year inflation will be higher than forcasted and GDP will grow, although

lower than what we planned

• The new path of fiscal convergence allows to public debt to GDP ratio to

begin to fall as of 2019

• After this period of turbulence the economy will grow again strongly

• With this program we will continue on a path of sustained growth, job

creation and poverty reduction

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Fiscal program

Central Bank’s autonomy

Fiscal balance convergence

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Primary balance goals (% of GDP)

Savings amount to 3,1% of GDP during the period 2018-2021

-3,2%

-2,2%

-1,2%

0,0%

-2,7%

-1,3%

0,0%

0,5%

2018 2019 2020 2021

Previous Targets Targets

Fiscal balance

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Projected primary and fiscal results (% of GDP)

-2,7%

-1,3%

0,0% 0,5%

-5,1%

-3,7%

-2,3%

-1,7%

2018 2019 2020 2021

Primary Fiscal Result Fiscal Result

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Fiscal effort

% of GDP

2018 2019 2020 Accumulated

1) Primary deficit (previous year) 3,8 2,7 1,3

2) Primary deficit (goal) 2,7 1,3 0

3) Fiscal effort (1) - (2) 1,1 1,4 1,3 3,8

- Variation in income (yoy) -0,4 0,4 0,1 0,1

- Variation in Primary Expenditure(yoy) -1,5 -1,0 -1,2 -3,7

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Reduction of primary expenditures

Primary expenditures

% of GDP 2020 / 2017

2018 2019 2020 % GDP Real terms

Primary expenditures -1,5 -1,0 -1,2 -3,7 -13%

- Social spending 0,1 0,5 -0,2 0,4 7%

- Subsidies (energy and transport) -0,3 -0,4 -0,4 -1,1 -48%

- Wages, goods and services -0,4 -0,2 -0,1 -0,7 -13%

- Current transfers to provinces -0,2 -0,3 -0,1 -0,6 -74%

- Other 0,0 -0,1 0,0 -0,1 -5%

- Capital expenditures -0,7 -0,6 -0,3 -1,6 -81%

Expenditures w/o Pension spending -1,6 -1,5 -1,0 -4,5 -30%

Fiscal results

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Consolidated fiscal result (nation and provinces, % of GDP)

-4,2%

-2,8%

-1,3%

0,1%

0,8%

-6,7%

-5,6%

-4,1%

-2,7%

-1,9%

2017 2018 2019 2020 2021

Primary Fiscal Result Fiscal Result

Public debt sustainability

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Public debt and interests* (% del PBI)

* Debt with private sector and IFIs Interests with private sector, IFIs and public financial sector

2,1%

2,4% 2,4% 2,3% 2,2%

2,1% 2,0%

29%

35% 35% 35% 34% 33% 32%

10%

15%

20%

25%

30%

35%

40%

1,5%

2,0%

2,5%

3,0%

2017 2018 2019 2020 2021 2022 2023

Interests Debt (Priv. S. and I.O.)

Social protection is at the core of the program

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• Periodic monitoring of a set of social indicators

• Floor on social assistance spending during the duration of the program

• Provision to allow additional spending of up 0.2% of GDP

• 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

• In addition, we will continue to foster gender equality with a special emphasis on

enhancing women’s participation in labor markets

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Fiscal program

Central Bank’s autonomy

Reinforcing Central Bank’s autonomy

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• We will submit to Congress a new charter for the Central Bank aiming at:

Establish price stability as the primary mandate of the BCRA

Discontinue all direct or indirect central bank financing of the Government

Limit transfers to the Treasury only to realized profits, which will only take place when

the BCRA’s capital exceeds an adequate level.

Give the BCRA the authority to set, in consultation with the Ministry of the Treasury,

the inflation targets for the next three years

Strengthen the avenues of BCRA accountability with Congress and the President

Provide for well-defined and limited grounds by which the Governor, Vice-Governor,

and Board members could be dismissed from their positions

Ensure a transparent report of the Central Bank balance sheet

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