Milei issues decree to take new IMF deal through Congress

President Javier Milei early Tuesday issued a decree seeking pre-approval from lawmakers for a new loan agreement with the International Monetary Fund, which he promises will clean up Central Bank accounts and wipe out inflation.

The deal with the International Monetary Fund provides for "the repayment of the loan capital over a period of up to 10 years with a grace period of four years and six months," according to a decree signed by Milei and published in the Official Gazette just after midnight on Tuesday.

The fresh funds – the amount of which was not specified and which is part of the IMF's Extended Fund Facility (EFF) programme – is in addition to the US$44 billion already owed by Argentina to the multilateral lender.

The sum borrowed would be used to “cancel non-transferable dollar bills held by the BCRA [Central Bank], starting with the closest maturities” and to pay obligations under the IMF's EFF programme, Milei’s decree states.

The government sought to justify the urgency of its decree by arguing for the necessary to strengthen the Central Bank’s financial position, guarantee macroeconomic stability, reduce restrictions on foreign currency and continue its push to reduce inflation.

According to a 2021 ‘Public Debt Sustainability’ law, Argentina’s head of state must seek authorisation from both chambers of Congress to sign new agreements with the IMF. 

The President is seeking to push the rejigged deal through via decree, which – unlike a bill – only requires the support of only one chamber to enter into force.

Milei's La Libertad Avanza party has a minority in Congress but used the same approach successfully last year to obtain approval for two controversial decrees limiting funds for retirees and universities.

A bicameral congressional committee must issue an opinion within 10 working days of receiving the decree, and then can begin discussing it in both chambers.

In an op-ed published last Saturday in the La Nación daily, Milei stated the IMF deal would allow the government to pay off its debts to the BCRA.

He blamed Argentina's persistently high inflation rate on an excess money supply partly caused by the deterioration of Central Bank assets.

"The agreement with the IMF seeks to restore the assets of the BCRA, so that inflation is only a bad memory of the past," he wrote.

Economist Hernan Letcher, the director of the Centro de Economía Política Argentina (CEPA) think tank, criticised the deal, saying on the X social network that it only "changes the creditor: from the State itself, to the IMF."

Argentina has one of the highest inflation rates in the world, running at 84.5 percent year-on-year in January.

But since Milei took office promising to cut spending and address government debt, price rises have slowed, with inflation dropping from 211.4 percent in 2023 to 117.8 percent in 2024.

In Milei’s decree, the Executive states that when it took office in December 2023, the country was facing stagflation, had no access to external financing and had negative net international reserves of US$11.2 billion. The government said that tally had since been increased by US$7 billion.

Economy Minister Luis Caputo said last week that a new programme with the IMF is all but agreed at staff-level. Negotiations are still ongoing, with a Fund spokesperson last week describing talks as “constructive.” 

Milei hopes to increase his lot in Congress in the forthcoming October's midterm elections, when half the lower house and a third of Senate seats are up for grabs. 

– TIMES/AFP/NA