The International Monetary Fund on Friday approved a new four-year US$20-billion programme to support President Javier Milei's efforts to revive the fortunes of Argentina’s troubled economy.
"The programme is expected to help catalyse additional official multilateral and bilateral support, and a timely re-access to international capital markets," the IMF said in a statement.
"Building on the authorities’ strong track record, the arrangement supports the transition to a new phase of their stabilisation and growth plan to entrench macroeconomic stability, strengthen external sustainability, and deepen structural reforms to create a more open and market-oriented economy," it continued.
The executive board's decision makes an initial disbursement of US$12 billion immediately available to Argentina, with the first review of the programme scheduled for June this year, when another US$2 billion could be made available.
"Today, our board approved a new programme for Argentina, recognising the impressive progress in stabilising the economy," wrote IMF Managing Director Kristalina Georgieva in a post on X.
"It is a vote of confidence in the Government's determination to advance reforms, foster growth and deliver higher standards of living for the Argentine people," she added.
The new agreement marks a big win for Milei, Argentina's self-described "anarcho-capitalist" president, who has built close ties to senior officials in Donald Trump's orbit, including the billionaire Elon Musk.
The economy will "grow like never before," Milei boldly forecast in a speech on national television.
"Argentina will be the country with the strongest economic growth in the next 30 years," he declared.
Landmark deal
The landmark deal will give cash-strapped Argentina more financial firepower to defend the peso. Milei’s government had announced earlier that it would ease strict foreign exchange controls, in place since 2019, starting Monday.
Instead of Argentina’s byzantine system of capital and currency controls, the peso will now be allowed to float within a band of between 1,000 and 1,400 pesos to the dollar, the Central Bank said in a statement.
On Friday, the peso traded at 1,097 to the dollar at the official rate, and at 1,375 at the unofficial "blue" rate.
The Central Bank added that the monthly US$200 cap on individual access to dollars would be lifted.
Some experts warned that a rapid devaluation could be on the cards, but Milei said in a nationwide broadcast Friday that Argentina has borrowed US$32 billion to protect the currency.
"The last link in the economic chain has been broken. We have eliminated the cepo for good," he declared in a nationwide address Friday, using the local word for foreign exchange restrictions.
Welcoming the changes while flanked by his Cabinet, Milei described the previous restrictions as an "aberration" that should never have been introduced.
Not the first
Argentina, Latin America's third-biggest economy but damaged by a record of economic crises, hyperinflation and defaults, already owes the IMF US$44 billion under a 2018 loan agreement – the lender's biggest ever – on which it has since renegotiated the repayment terms.
Milei and Economy Minister Luis Caputo have sought a new loan to cancel Treasury debt to the Central Bank, wipe out stubborn inflation, boost growth and replenish foreign reserves.
Caputo said the IMF's support would "allow us to end the exchange controls that have done so much harm to Argentines and disrupted the normal functioning of the economy."
Under the new rules, the differential exchange rate for exporters will be eliminated, while "the distribution of profits to foreign shareholders is allowed starting from the financial years beginning in 2025, and the deadlines for the payment of foreign trade operations are relaxed," said the government in a statement.
The prospect of another IMF loan has caused a run on the peso, prompted by fears that a new deal could entail a currency devaluation.
The IMF has expressed approval of Milei's attempts to curb inflation, which came in higher at 3.7 percent for the month of March compared to 2.4 percent in February.
Annual inflation came in at 55.9 percent in March — down from 211 percent at the end of 2023, but still one of the highest rates in the world.
"Inflation has no other destiny than to disappear in Argentina sooner or later," declared Milei Friday.
"We have gone from being the worst student to an exemplary student that only spends what comes in and not one peso more," he boasted. "We put the accounts in order in record time."
Support
The programme is the 23rd time the IMF has bailed out Argentina since it became a member of the Washington-based institution in 1956.
The pillars of the new programme are "a strong fiscal anchor, transitioning towards a more robust monetary and FX regime, with greater exchange rate flexibility in the context of a gradual easing of FX restrictions, and advancing a broad range of structural reforms to foster a more dynamic, market-oriented economy," according to the IMF, which acknowledged current "elevated and rising global risks."
Minutes before the IMF statement arrived on Friday, the World Bank announced a separate support package of measures worth some US$12 billion.
It is the latest in a series of multilateral pushes to support Milei’s administration, which is benefitting from the libertarian’s ties to Trump in Washington.
Last year, Argentina recorded its first budget surplus in a decade, but the collateral damage has been a loss of purchasing power, jobs, and consumer spending.
US Treasury Secretary Scott Bessent is due next week to visit Argentina and "affirm the United States’ full support for Argentina’s bold economic reforms," a statement from his office said.
"Under President Milei, Argentina has conducted policy through actions, not just words," it added. "As highlighted by President Donald J. Trump, President Milei has brought Argentina back from economic oblivion."
The World Bank package, which includes commitments from three different bodies, "is designed to support reforms that continue to attract private investment and further boost the measures being implemented by the national government to promote job creation," the World Bank said in a statement.
The IMF statement also confirmed additional funding would arrive from the Inter-American Development Bank and other sources.
– TIMES/AFP/PERFIL
Comments