Argentina has signed a $ 20 billion agreement with the International Monetary Fund (IMF) and dismantled much of its foreign exchange controls as President Javier Milei seeks to take the country out of a prolonged economic crisis.
With markets seeing events as positive, what does the agreement with the IMF and change in currency politics mean?
How much is Argentina receiving?
The country says it should receive $ 28 billion in 2025 alone, including $ 15 billion from the IMF, $ 6.1 billion from other multinational creditors, $ 2 billion global banks and $ 5 billion from the extension of a currency swap with China.
The IMF will disburse $ 12 billion this week, followed by a June review review that is expected to release another $ 2 billion, and a new overhaul with another $ 1 billion.
“These net resources will be used to strengthen the Balance Sheet (Central Bank) through the repurchase of non -transferable securities by the Ministry of Economy,” said the Central Bank of Argentina.
What is the new currency policy?
The new exchange rate regime will allow the weight to freely fluctuate on a mobile track between 1,000 and 1,400 pesos per dollar, before the previous control policy that maintained the currency around 1,074 on Friday.
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The new mobile band will expand by 1% each month, both upper and lower. The Central Bank will be able to buy and sell dollars if the band is broken, while inside the band it can choose to operate in the secondary weight markets through open market operations, the Central Bank said.
The IMF added in its report that the monetary structure will evolve over time to a “fully flexible exchange rate in the context of a bimonetary system where weight and dollar coexist”.
According to the agreement with the IMF, Argentina will need to accumulate net international reserves of $ 4 billion by the end of the year, compared to the level of December 31, 2024. The basic goal will make this accelerate to an increase of $ 8 billion next year.
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Although Milei’s government has made the accumulation of reserves one of the main focuses and had some success, this has reversed itself in recent weeks amid growing pressure on weight, leading net reserves to fall to $ 7 billion, according to an IMF estimate.
The agreement provides for a basic scenario that seeks primary fiscal surplus this year of 1.3% of GDP, just below last year, although Economy Minister Luis Caputo has already suggested that the government will have a higher goal, around 1.6%.
The General Tax Goal – including debt payment – aims at a fiscal balance this year. The primary and general surplus would begin to increase next year and in the following years.
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Can Argentina return to capital markets?
The IMF has stated in its report that if there is a “decisive implementation” of the program and a rapid accumulation of reserves, this could reduce loan costs for Argentina and make it access international capital markets again by the beginning of 2026.
The challenges of the country, however, have not yet ended, with reservations in red and inflation, although it has fallen dramatically since Milei took office in December 2023, it is still persistent.
“Reservations coverage is still very weak,” said the IMF. “More work is needed to anchor inflation and lastly strengthen the country’s external position and resilience to a more complex global scenario.”
