The International Monetary Fund (IMF) announced on Tuesday that it had reached a preliminary agreement with Argentina on a $20 billion (€18.1bn) bailout package. While the deal is still a staff-level agreement, it is subject to final approval by the IMF’s executive board, which is expected to convene in the coming days.
The bailout package provides crucial support to President Javier Milei as he attempts to reshape Argentina’s economic landscape. Milei’s free-market austerity agenda has helped reduce inflation and stabilize the country’s economy, reversing the excessive borrowing of previous left-wing governments that led to Argentina’s infamous debt defaults. Argentina has now received more IMF bailouts than any other country.
The timing of the IMF announcement is critical for Argentina’s economy, which is facing mounting pressure from dwindling foreign exchange reserves. With the government enforcing tighter money-printing regulations and using scarce dollars to stabilize the Argentine peso, there were growing fears that without an IMF deal, Argentina would struggle to meet its debt obligations and import bills.
The IMF funding gives Milei a chance to ease Argentina’s strict foreign exchange controls, a move that could bolster market confidence in his economic plan. For the past six years, capital controls have deterred investment by restricting companies from sending profits abroad, while the central bank carefully managed the peso, which is pegged to the dollar.
Since 1958, Argentina has taken out 22 IMF loans, accumulating over $40 billion (€36.2bn) in debt to the organization. Most of these funds were used to repay previous loans, contributing to the IMF’s fraught reputation among Argentines, many of whom blame the lender for the country’s economic collapse and debt default in 2001.
Despite concerns, the IMF has expressed support for Milei’s austerity measures over the past 16 months, which have been even more stringent than the IMF’s usual prescriptions. A former TV personality and self-declared “anarcho-capitalist,” Milei assumed office promising to reduce Argentina’s bureaucracy, combat inflation, and open the economy to global markets after years of isolation.
Unlike past Argentine leaders, who sought to avoid provoking public backlash with austerity measures, Milei has aggressively restructured the state by firing tens of thousands of public employees, reducing ministries, cutting inflation adjustments for pensions, freezing public works projects, lifting price controls, and slashing subsidies. Critics argue that the poor have borne the brunt of these measures, with retirees protesting weekly against pension cuts, which make up a significant portion of the austerity program. Major labor unions have announced a 36-hour general strike in protest, starting on Wednesday.
Despite the criticism, Milei has maintained strong approval ratings, thanks in part to his success in reducing inflation, which dropped from 211% annually to 118% during his first year in office. Turning budget deficits into surpluses has also boosted the local stock market and improved Argentina’s country-risk rating, a key indicator of investor confidence.
“The agreement builds on the authorities’ impressive early progress in stabilising the economy, underpinned by a strong fiscal anchor, that is delivering rapid disinflation,” the IMF said in its statement announcing the deal under a 48-month arrangement. “The program supports the next phase of Argentina’s homegrown stabilisation and reform agenda.”
It remains uncertain how much money Argentina will receive upfront, as this was a key sticking point in the final negotiations. Argentina is seeking a substantial upfront payment to replenish its foreign exchange reserves, while IMF loans are typically disbursed over several years.
Milei shared the IMF’s statement on social media platform X, posting a photo of himself hugging Economy Minister Luis Caputo. “Vavos!” he wrote, apparently misspelling “Vamos!” or “Let’s go!” in his excitement.
