Argentina: First Review Under the Extended Arrangement Under the Extended Fund Facility, Requests for a Waiver of Nonobservance of a Performance Criterion, Rephasing of Access, Modification of Performance Criteria, and Financing Assurances Review-Pres

This paper reviews the first phase of Argentina’s Extended Fund Facility arrangement, highlighting a strong start despite a challenging external environment. Tight macroeconomic policies have enabled a smooth transition to a more flexible exchange rate regime and the easing of foreign exchange restrictions. Program performance has been generally positive, with the primary fiscal surplus target for end-May met with a margin, no central bank monetary financing, and continued adequate social program coverage. However, the mid-June target for net international reserves accumulation was missed due to significant reserve losses and limited return of outflows, influenced by domestic and external uncertainties and the authorities' preference for price discovery and disinflation. The economy is projected to grow by 5.5 percent in 2025, with inflation expected to fall to 20–25 percent by year-end. Maintaining tight and balanced macroeconomic policies is essential to anchor disinflation, improve reserve buffers, and support access to international capital markets. The authorities' ambitious structural reform agenda, aimed at enhancing state efficiency and fostering a more market-based economy with flexible product and labor markets, is crucial for long-term investment. Policies will also be implemented to manage potential dislocation costs from these reforms.