Argentina's lower house of Congress on Wednesday gave President Javier Milei's government the green light to reach a new loan agreement with the International Monetary Fund.
Milei asked lawmakers to approve a new 10-year loan, on top of the US$44-billion Argentina already borrowed in 2018 by former president Mauricio Macri’s government, to boost the Central Bank's foreign currency reserves and cover looming debt payments.
The amount of the prospective loan to Argentina – which has been bailed out by the International Monetary Fund 22 times, despite several debt defaults – has not yet been disclosed, though it will include a grace period for repayments lasting four-and-a-half years.
Negotiations with the Washington-based lender are still underway. Key details, however, remain under wraps.
Expectations for a change in currency policy under the new programme have heightened recently, sending the peso to its lowest in more than five months on the parallel market this week.
In an effort to calm market sentiment, Economy Minister Luis Caputo gave an interview to local media Tuesday, but declined to comment on future policy changes.
‘Maturity and greatness’
Under a 2021 law, Argentina's president must seek authorisation from both chambers of the legislature to sign agreements with the IMF, but an emergency executive decree only needs approval from a single congressional chamber to go into effect.
With 129 votes in favour to 108 against and six abstentions in the lower house Chamber of Deputies, Milei now has a free hand to finalise the agreement.
The ruling party is in a minority in Congress but has formed ad hoc alliances to push through the President’s cost-cutting agenda.
The initiative was supported by Milei's La Libertad Avanza party, the right-wing PRO party, the centrist Unión Cívica Radical (UCR) and Cívica Coalición and lawmakers from the Innovación Federal, Producción y Trabajo and half of the Encuentro Federal caucuses.
Milei celebrated the result of Wednesday’s vote in a post on the X social network, posting his traditional phrase: "Viva la libertad carajo!"
In a later statement, he hailed the backing as a "message of maturity and greatness."
Protests
The vote on the IMF loan took place as thousands of protesters gathered outside Congress to protest Milei's austerity measures and cuts to pensions, as well as his negotiations with the IMF.
"Every time something is agreed with the IMF, things get worse for us," said Rodolfo Celayeta, a 73-year-old retiree who took part in the demonstration that was bigger but more peaceful than protests last week by pensioners, backed by football fans.
For months, retirees have carried out weekly demonstrations, but earlier this month, the rally took a violent turn as armed security clamped down on violent protesters.
Forty-five people were injured last week in running battles with police.
As night fell Wednesday, minor incidents were reported as demonstrators threw stones and other projectiles at police. Two officers were taken away by ambulance, one of them hit by fireworks.
Security Minister Patricia Bullrich said the security operation, with some 2,000 officers deployed, was "successful."
‘Exterminate’ inflation
Milei, who has slashed state spending since becoming president, says the new loan will allow the government to pay off its debts to the Central Bank. He says that will, in turn, “exterminate” inflation, Argentina's eternal bugbear.
It also says the country’s grave economic situation justifies borrowing from the Washington-based lender by decree instead of obtaining full congressional approval.
Argentina has one of the highest inflation rates in the world.
Since Milei took office in December 2023 and began slashing public spending, price rises have slowed considerably, though poverty levels have risen.
Inflation fell from 211 percent year-on-year at the end of 2023 to 66 percent today.
The government began talks with the IMF in November on a new "extended fund facility" (EFF) to replace a revised agreement made in 2022.
The EFF will refinance Argentina's debt, to help it pay off the US$44-billion loan negotiated under Macri in 2018. The loan was the biggest ever granted by the IMF.
Fresh funds
The government needs fresh funds from the multilateral lender to strengthen reserves and reassure markets.
Over the last four working days, the Central Bank has sold US$932 million to prop up the peso – 3.4 percent of the BCRA's reserves.
“The agreement is an instrument that will allow us to give sustainability to the stabilisation plan, reducing exchange restrictions, decreasing inflation and returning to the path of development,” said Mercedes Llano, deputy for the ruling La Libertad Avanza party, during Wednesday’s lower house debate.
Opposition deputy Daniel Arroyo countered that “you have to have a lot of faith – you have to be a believer to believe that [the IMF's dollars] are not going to flee."
– TIMES/BLOOMBERG/AFP
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