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Argentina’s government and the International Monetary Fund have reached a staff-level agreement on the first review of the country’s $44 billion supplementary financing agreement, with the lender saying the country had met all quantitative targets in the first trimester.

IMF officials have concluded a review of the program signed in March and known as the Extended Financing Facility. It is a key step towards unlocking further debt relief from Argentina, which in March refinanced money owed to the fund following a failed program given to the previous government in 2018. .

The deal is subject to approval by the IMF’s executive board, which is expected to discuss it in the coming weeks, the fund said in a statement late Wednesday. Once the review is complete, Argentina would have access to approximately $4 billion.

IMF staff and Argentine authorities agreed that the annual targets established when the agreement was approved would remain unchanged, particularly those related to the primary fiscal deficit, monetary financing and net international reserves, the fund said.

In order to take into account the initial impact of external shocks, in particular the war in Ukraine and seasonal patterns of expenditure and imports, it is proposed to modify the intra-annual quarterly trajectories of the primary budget deficit and the accumulation of reserves, while keeping the annual program targets unchanged, the IMF added.

Argentina’s 22nd deal with the IMF is already facing investor doubts, with the country’s bonds continuing to trade at troubled levels. Analysts say it will be difficult for the government to meet key targets of accumulating reserves at the central bank and printing money to fund government spending.

For example, by the end of June, the central bank must accumulate $4.1 billion in net international reserves, which excludes loans and bank deposits which are part of the overall figure. Yet total reserves have risen by less than half that figure so far this year (the central bank does not release an official figure for net reserves).

The risk of recession is also increasing. JPMorgan Chase & Co. expects contractions in the second and third quarters of this year. Some economists say the accumulation of reserves could hamper the government’s ability to pay for the dollar-denominated imports that businesses need for manufacturing and other activities that help drive growth.

The economic impact of Russia’s invasion of Ukraine complicates Argentina’s prospects. Annual inflation is accelerating towards 60%, with some economists expecting 70% by the end of the year. This is partly the result of rising food and energy prices pushing up electricity bills because the government is cutting subsidies to comply with the IMF deal.

(Updates with more information beginning in the sixth paragraph.)

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