(Bloomberg) -- The International Monetary Fund’s board of directors approved a $50 billion credit line for Argentina on Wednesday, making it the largest loan in the institution’s history.
IMF board members voted in favor of the three-year stand-by arrangement, according to a statement by the Fund. The board’s decision allows Argentine authorities to immediately tap $15 billion, according to the statement. One-half of the amount, or $7.5 billion, will be used for budget support. The remaining $35 billion will be made available over the duration of the arrangement, subject to quarterly reviews by the board.
"The approval today is clear evidence of the international community’s trust in Argentina," said IMF Managing Director Christine Lagarde in Washington. "The Argentine authorities have designed, conceived and take full ownership of the program of reforms."
Lagarde said Argentina’s reforms have four main goals -- achieve a fiscal balance by 2020, lower inflation, ensure reforms don’t negatively impact "vulnerable" Argentines and lessen strain on the government’s balance of payments.
Argentina’s government has indicated that it intends to draw on the first tranche of the arrangement but will treat the remainder as precautionary, the fund said.
Growth in South America’s second-largest economy will decline this year compared to last, but should recover to a "decent pace" in 2019, said Roberto Cardarelli, the IMF’s mission chief to Argentina. He stressed that the success of the program hinges on Argentina’s central bank implementing a monetary policy that allows for a freely floating exchange rate.
President Mauricio Macri sought the Fund’s aid in early May as the peso was in free fall, amid a selloff in emerging markets and concern about Argentina’s economy. The peso is down more than 32 percent so far this year, among the worst performances in emerging markets.
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