The IMF and Argentina, 1991–2001

Description

This report evaluates the role of the IMF in Argentina during 1991-2001, focusing particularly on the period of crisis management from 2000 until early 2002. The primary purpose of the evaluation is to draw lessons for the IMF in its future operational work. The evaluation suggests ten lessons, in the areas of surveillance and program design, crisis management, and the decision-making process, and, on the basis of these lessons, offers six sets of recommendations to improve the effectiveness of IMF policies and procedures. Cover Contents Preface Abbreviations and Acronyms THE IMF AND ARGENTINA, 1991–2001 Executive Summary 1 Introduction Overview of Economic Developments, 1991–2001 Factors Contributing to the Crisis 2 Surveillance and Program Design, 1991–2000 Exchange Rate Policy Fiscal Policy Structural Reforms in Macro-Critical Areas The Manner of Engagement with Argentina 3 Crisis Management, 2000–01 Second Review and Augmentation, January 2001 Completion of Third Review, May 2001 Fourth Review and Augmentation, September 2001 Noncompletion of Fifth Review, December 2001 The Decision-Making Process 4 Lessons from the Argentine Crisis Major Findings Lessons for the IMF Recommendations Boxes 1.1. The IMF and Argentina, 1991–2001 1.2. Was the Convertibility Regime Viable? 1.3. The Politics of the Convertibility Regime 2.1. Economic Characteristics of Hard Peg Economies 2.2. Measuring the Equilibrium Real Exchange Rate 3.1. Framework and Implementation of Private Sector Involvement 3.2. Financial Instruments Used During the Crisis 3.3. Measures Announced or Taken During 2001 Without Prior Consultation With the IMF 4.1. How and When Could an Alternative Approach Have Been Attempted? 4.2. Experience with Catalytic Finance Figures 1.1. Inflation 1.2. Capital Flows 1.3. Real Quarterly GDP Growth 1.4. Interest Rate Spreads over U.S. Treasuries 2.1. Monthly Real Effective Exchange Rate 2.2. Trade and Current Account Balances 2.3. Comparison of Fiscal Targets and Actuals 2.4. Projected Overall Fiscal Balances and Their Outturns 2.5. Public Sector Debt Targets and Actuals 2.6. Public Sector Debt and General Government Overall Balances 2.7. Real GDP Growth and Unemployment 3.1. IMF and Private Sector (Consensus) Forecasts for Key Program Variables 3.2. Bank Deposits, January 3, 2000–December 31, 2001 3.3. Evolution of Fiscal Deficit Targets and Outcomes 3.4. International Reserves, January 3, 2000–December 31, 2001 Tables 1.1. Key Economic Indicators 3.1. Program Projections and Targets for 2001 3.2. Fiscal Performance Under the Stand-By Arrangement in 2001 Appendixes 1 The IMF’s Financing Arrangements with Argentina, 1991–2002 2 Argentina and the IMF Prior to 1991 3 A Retrospective on Argentina’s Fiscal Policy, 1991–2001 4 Selected Program Conditionality, 1991–2001 5 Economic Characteristics of Major Emerging Market Economies 6 Debt Sustainability Analysis 7 A Preliminary Analysis of the 2001 Mega-Swap 8 Financial Instruments Used by Argentina During the Crisis 9 Timeline of Selected Events, 1991–2002 10 List of Interviewees Appendix Figures A5.1. General Government Fiscal Balance in Crisis Countries A6.1. External Debt Sustainability A6.2. Public Debt Sustainability A7.1. Exchange Options Appendix Tables A3.1. Public Sector Balance, 1961–2000 A3.2. Consolidated Public Sector A3.3. Adjusted Fiscal Balance A3.4. Social Security Balance A3.5. Federal and Provincial Fiscal Accounts A5.1. Indicators of Economic Structure in Selected Emerging Market Economies A7.1. An Overview of the Mega-Swap A7.2. Details of Old and New Bonds Bibliography STATEMENT BY THE MANAGING DIRECTOR, IMF STAFF RESPONSE, IEO COMMENTS ON MANAGEMENT/STAFF RESPONSE, STATEMENT BY THE GOVERNOR FOR ARGENTINA,AND SUMMING UP OF IMF EXECUTIVE BOARD DISCUSSION BY THE CHAIRMAN Statement by the Managing Director IMF Staff Response IEO Comments on Management/Staff Response Statement to Executive Board Members from the Governor for Argentina, His Excellency Roberto Lavagna Summing Up of IMF Executive Board Discussion by the Chairman