(Bloomberg) -- The International Monetary Fund’s executive board approved a $5.4 billion disbursement to Argentina, a key step forward in the government’s program that has faced setbacks amid a worsening economic outlook.

Downside risks to the country’s economic outlook have increased, warranting a need for more central-bank rate increases “in the event of further inflation shocks” or currency pressures, IMF First Deputy Managing Director Gita Gopinath said Saturday. Argentina needs a “stronger policy package,” including potential changes to currency policies, she said in a statement. 

Argentina controls the official peso exchange rate through a cobweb of currency controls and capital restrictions. Gopinath didn’t specify which policy changes might be needed. 

Argentina’s annual inflation rate has surged since early last year and surpassed 100% in February.

“The economic situation has become more challenging since the beginning of this year in light of the increasingly severe drought and policy setbacks,” Gopinath said, adding that “additional macroeconomic policy tightening and further modifications to FX policies may be required to safeguard macroeconomic stability.” 

The board approved the funds after IMF staff finished the fourth review of Argentina’s $44 billion deal, the fund said in a statement Friday. It brings total disbursements under the extended fund facility to $28.9 billion.

Argentina’s 22nd IMF program in history — the most of any member country — stumbled out of the gate a year ago with lawmakers in the governing coalition voting against the agreement. The program has since faced heightened uncertainty before a looming recession and October’s presidential election, with annual inflation in Argentina surpassing 100% last month.

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The IMF earlier this month called on Argentina to make stronger efforts to address foreign reserve losses, galloping inflation and other “policy setbacks” amid a severe drought that’s hitting the country’s crucial commodities sector.

The IMF granted Argentina’s requested to a change to a key target in the program, known as net reserve accumulation, but still hadn’t published the full staff report with the figure as of Saturday. Net reserves, or the stockpile of cash at the central bank, is seen as crucial to preventing a major currency devaluation.

Earlier in March, the government expected to reduce the 2023 reserve target in the IMF deal by about $2 billion, according to two senior government officials. That would reduce the annual reserve target to roughly $2.8 billion from $4.8 billion stipulated in the last IMF review.

Argentine President Alberto Fernandez visited US President Joe Biden at the White House this week. He said Biden committed to supporting Argentina at the IMF and other multilateral institutions. 

--With assistance from Patrick Gillespie.

(Updates with comments from IMF leadership in second paragraph.)

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