BUENOS AIRES (Reuters) - The International Monetary Fund's executive board ratified on Friday its third review of Argentina's economic progress under a major financing deal agreed last year, unlocking a roughly $10.8 billion tranche of funds.
The IMF said in a statement the board had approved an agreement with Argentina struck with a staff-level team last month, a boost for President Mauricio Macri as he grapples with renewed volatility in the market ahead of October elections.
Argentina agreed on a $56.3 billion standby financing deal with the fund last year when Latin America's No. 3 economy was battered by rampant inflation and a run on the peso currency, which lost half its value against the U.S. dollar.
That deal saw the country's leadership commit to tighter monetary policies and austerity measures to rein in public sector debt and reduce a high fiscal deficit.
Christine Lagarde, the IMF's managing director, said in a statement the measures were "bearing fruit" and there were signs of revival in the economy despite inflation "proving difficult to break."
"Economic activity contracted in 2018 but there are signs that the recession has bottomed out, and a gradual recovery is expected to take hold in the coming quarters," she said.
The third review report, released later, said Argentina's economy would likely contract 1.2 percent this year, an improvement on the IMF's previous forecast of a 1.7 percent contraction. It forecast 2019 inflation of 30.5 percent.
It added the October election was the "most visible near-term risk," saying it could raise market anxiety and lead to larger-than-expected peso outflows and "renewed concerns about debt dynamics".
Lagarde added the government needed "continued prudence" in executing its spending plans and strengthening revenues to meet a 2019 target of achieving a primary fiscal balance.
An Argentine Treasury official, asking not to be named, said the program was going as expected and that the view inside government was that a recovery had already begun. The official added that no further major spending cuts were planned.