Milei nears US$20-billion Argentina loan as IMF staff sign off

Argentina reached an agreement with International Monetary Fund staff, a major step before the lender officially votes on a new US$20-billion deal for the crisis-prone nation.

The IMF announced the milestone on Tuesday without providing details, including how much Argentina will receive up front or how President Javier Milei plans to unwind currency controls. Both sides previously disclosed the amount of the programme, which would be Argentina’s third since 2018.

Members of the Washington-based lender’s executive board are expected to vote on the agreement Friday, Bloomberg News reported earlier.

The 48-month deal, if approved by the board, is set to give Argentine officials much needed cash to shore up the peso and begin removing currency and capital controls. The first disbursement from the Fund should give Milei breathing room to possibly eliminate those controls by his self-imposed deadline at 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. It will also put it toward principal maturities the government must repay to the IMF over the next four years from the previous programme that began in 2022, according to a decree published March 10.

Milei’s negotiators say they want at least 40 percent — or US$8 billion — of the programme up front, as the first disbursement is being closely watched by investors. The board has held informal meetings to discuss key details of the loan, including the amount of the initial payout.

The so-called Extended Fund Facility will be a key step in Milei’s push to bring Argentina back to international capital markets after a sovereign default by his predecessors in 2020, as the pandemic deepened an ongoing economic crisis. It will also validate the libertarian president’s strategy to align himself with President Donald Trump, given the United States is the IMF’s largest shareholder.

A new deal will mark Argentina’s 23rd IMF programme in a beleaguered relationship stretching over decades. The previous two programmes failed to stabilise Argentina as policy mistakes, poor communication and presidential elections swung the country from right to left and back to the right. Its economy infamously collapsed in 2001 as the IMF chose not to continue giving the country more money amid a financial crisis, sparking violent protests in Buenos Aires and a nationwide bank run.

Under Milei, negotiations grew tense over his first year in office even as IMF leadership praised his government’s spending cuts that thwarted chronic deficits at the root of Argentina’s many crises. The President publicly criticised IMF Western Hemisphere Director Rodrigo Valdés, who chose to step away from negotiations last year.

Talks also dragged on over diverging views about Milei’s currency policies. Argentina has controlled its exchange rate, a move that’s helping to slow inflation and sustain the President’s high approval ratings but is also draining already scarce foreign reserves.

IMF officials called on the government to loosen its grip on the currency during Milei’s first year in office. Investors also warn the controls run the risk of forcing another abrupt devaluation as markets see the peso overvalued. Milei and Economy Minister Luis Caputo, who led Argentina’s negotiations with the IMF, dismiss criticism that the peso is too strong.

Amid the scramble to close the deal, which Caputo repeatedly said would be finalised before the end of April, Milei doubled down on his effort to draw closer to Trump. Last week, the Argentine leader abruptly travelled to Florida in hopes of meeting the US president at his Mar-a-Lago resort, but he went home empty- handed.

Meanwhile, Trump’s special envoy to Latin America, Mauricio Claver-Carone, put public pressure on Milei to end Argentina’s US$18-billion currency swap line with China, its main source of foreign reserves. The Chinese government hit back during a press briefing Tuesday, accusing the US government of trying to drive a wedge between Beijing and the region.