Argentina reached a US$20-billion agreement with the International Monetary Fund Friday as President Javier Milei made sweeping changes to ease the nation’s currency controls in a landmark moment for his government.
As part of the agreement, Argentina will receive US$12 billion of the total up front, while the Central Bank announced it will let the peso freely trade within a range of 1,000 pesos to 1,400 pesos per dollar, with that spectrum widening by one percent on either end each month. The policy change, among several rolled out, abandoned Argentina’s strictest currency controls that Milei had inherited and later tightened after taking office.
“This time is indeed different,” Milei said in a national address late Friday, touting his economic achievements so far. “It’s the first time in history the Fund approves a programme that isn’t to finance a macroeconomic transition from disorderly to orderly, but to support an economic programme already bearing fruit.”
It marks Argentina’s 23rd IMF agreement and the third since 2018. Negotiations dragged on for months as stakes remain high for a successful programme after the past two went off the rails in the crisis-prone nation.
IMF Managing Director Kristalina Georgieva praised Milei’s government for eliminating a chronic fiscal deficit, and said the programme has backup plans in place as volatility has roiled global markets in recent weeks without mentioning the trade war between the United States and China.
“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,” Georgieva posted on X. In a statement she added that “against the global backdrop of elevated and escalating risks, the authorities have contingency plans in place, to be complemented by agile policy making in the context of programme reviews.”
Milei, who has cultivated an ideological bond with US President Donald Trump, will get another boost Monday when US Treasury Secretary Scott Bessent visits Buenos Aires. The United States is the largest stakeholder at the IMF.
Among other key policy steps taken Friday, Economy Minister Luis Caputo said the government is eliminating a rule known as “dollar blend” so that all export revenue is liquidated in Argentina’s official exchange market instead of in a split system that had been in place for years. Ending the rule is aimed at helping the Central Bank boost its foreign reserves.
Authorities also said they would end a US$200 per month cap for individuals to exchange pesos for dollars as well as fees applied on those transactions. The monetary authority will let companies send new dividends abroad going forward, while dividends that built up over past years will take more time to unwind. Separately, firms can immediately pay for imports, reversing a previous restriction.
Investors cheered Argentina’s pivot away from most of the controls as a stepping stone toward eventually returning to international debt markets after a sovereign restructuring in 2020. The Global X MSCI Argentina ETF was up more than five percent in postmarket trading Friday.
“Bonds should trade up on the news,” said Aaron Gifford, an emerging markets sovereign analyst at T. Rowe Price in Baltimore. “This was the missing piece to allow Argentina to eventually re-establish market access. It’ll take some time given the more difficult external backdrop but I’m positive they’ll get there.”
“This combination is the best possible outcome, as it will help keep external imbalances from worsening. The success of the plan hinges on whether Argentina can attract foreign investors who have stayed away for several years, and on whether authorities overindulge in FX intervention," said Adriana Dupita, Bloomberg's deputy chief emerging markets economist.
Eliminating the controls, collectively known in Argentina as “el cepo,” may represent a significant change in fortunes for the Milei administration, which has struggled to accumulate hard-currency reserves in the last month and restore calm among some investors who were awaiting details on an IMF programme.
“The announcement is more audacious than expected,” said Marcelo García, director for the Americas at consulting firm Horizon Engage. Milei is taking “a bit of a leap of faith by lifting the cepo. It is bolder than one could have imagined at the start of an electoral year.”
In addition to the IMF programme, the World Bank Group announced a US$12-billion aid package over the next three years, and the Inter-American Development Bank is providing Argentina with US$10 billion over the same period.
Caputo said Argentina also hopes to secure another US$2 billion in repurchase agreements while adding that the government is aiming to boost net reserves to a surplus of US$4 billion by the end of the year.
Officially, Argentina plans to use IMF funding to pay down debts the country’s Treasury owes to the Central Bank as well as principal maturities the government must repay to the IMF over the next four years from its previous programme that began in 2022, according to a decree published March 10.
More IMF money stands to help Argentina’s economic recovery after two straight years of contractions. Analysts surveyed by the Central Bank project 2025 economic growth of five percent to go with annual inflation of 27.5 percent by December after consumer prices rose nearly 300 percent in Milei’s first year in office.
Investors have grown antsy as questions swirled around whether an IMF deal would force Milei to devalue the currency for a second time since taking office. In the run-up to the deal, traders wagered that the peso in official markets would fall some 10 percent against the dollar by the end of the April, a rate that goes beyond the one-percent per month pace at which authorities let the currency weaken.
Officials had controlled the rate of the peso’s slide, letting it weaken at a rate of one percent per month, significantly less than inflation. Many have called the policy unsustainable, warning that it made Argentine businesses less competitive in trade and pushed up costs for tourists. On the parallel markets that locals use to skirt currency controls, the peso last traded at 1,341 per dollar, according to pricing data compiled by Bloomberg.
by Kevin Simauchi & Manuela Tobias, Bloomberg
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