The International Monetary Fund on Tuesday said it has reached a preliminary agreement with Argentina on a $20 billion bailout, providing a welcome reprieve to President Javier Milei as he seeks to overturn the country’s old economic order.
As a staff-level agreement, the rescue package still requires final approval from the IMF’s executive board, which was expected to meet in the coming days.
The fund’s long-awaited announcement offered a lifeline to President Milei, who has cut inflation and stabilized Argentina’s economy with a free-market austerity agenda. His policies have reversed the reckless borrowing of left-wing populist governments that had brought the country infamy for defaulting on its debts numerous times. Argentina has received more IMF bailouts than any other nation.
It came at a critical moment for South America’s second-biggest economy. Pressure had been mounting on Argentina’s rapidly depleting foreign exchange reserves as the government tightened rules on money-printing and spent more of its scarce dollars to prop up the wobbly Argentine peso.
Fears grew that if Milei’s government failed to secure an IMF loan or tap a major source of foreign currency, its hard-won austerity measures would veer off-track and leave Argentina, once again, unable to service its huge debts or pay its import bills.
The fresh cash gives Milei a serious shot at easing Argentina’s strict foreign exchange controls, which he says he needs to encourage investment and convince markets that his reforms can be sustained in the notoriously volatile nation.
The controls mean that companies can’t send profits abroad and ensures the central bank manages the peso, which is pegged to the dollar.
With 22 IMF loans handed out since 1958, Argentina owes the IMF more than $40 billion. Most IMF funds are used repay the IMF itself, giving the organization a divisive reputation among Argentines. Many blame the lender for the country’s historic economic implosion and debt default in 2001.
The IMF, which had been wary of striking yet another deal with its largest debtor, had nonetheless praised Milei’s austerity measures – an even harsher version of its own typical prescription – over his first 16 months in office.
The former TV personality and self-proclaimed “anarcho-capitalist” came to power with the goal of downsizing Argentina’s bloated state, ending the country’s proclivity for money-printing, opening the economy to international markets and wooing foreign investors after years of isolation.
Unlike Argentine politicians in years past who sought to avoid enraging the masses with brutal austerity, Milei has fired tens of thousands of state employees, dissolved ministries, gutted the education sector, cut inflation adjustments for pensions, froze public works projects, lifted price controls and slashed subsidies.
Critics note that the poor have paid the highest price for Argentina’s macroeconomic stability.
But Milei has maintained solid approval ratings, which analysts attribute to his success in driving down inflation. Flipping budget deficits to surpluses has sent Argentina’s stock market booming and its country-risk rating, a pivotal barometer of investor confidence, tumbling.
“The agreement builds on the authorities’ impressive early progress in stabilizing the economy, underpinned by a strong fiscal anchor, that is delivering rapid disinflation and a recovery in activity,” the IMF said in a statement announcing the agreement on the loan under a 48-month arrangement. “The program supports the next phase of Argentina’s homegrown stabilization and reform agenda.”
It remained unclear how much Argentina would receive up-front in the program – a key sticking point in the latest negotiations over the deal. Argentina is seeking a big upfront payment to replenish its reserves, even as IMF loans are usually disbursed over several years.
Milei reposted the announcement on social media platform X, with a photo showing him hugging Economy Minister Luis Caputo. “Vavos!” he wrote – apparently mispelling “Vamos” or “Let’s go!” in his excitement.