6 min read
0 comments
Milei government negotiates new US$20 billion loan with the IMF. Argentina tries to strengthen reserves and stabilize the economy. See details of the negotiations with the fund
Argentina has taken another step forward in its long history of agreements with the International Monetary Fund (IMF). The South American country is seeking a new loan of US$20 billion with the stated aim of bolstering the Central Bank's reserves.
According to government of Javier Milei, the money will not be used to cover expenses or deficits, but to recapitalize the Central Bank's assets. The proposal, however, has generated criticism and divided opinions among economists and local experts.
Caputo announces value and denies use for public expenses
Economy Minister Luis Caputo announced the amount of the new loan during an event for the Latin American insurance sector. He said the amount agreed with the IMF technical team still needs approval from the Fund's board.
- Nubank and other fintechs in the sights of the Central Bank of Brazil: Name change in sight
- Is your driver's license at risk? PRF issues warning about false suspension scam
- New Chinese company arrives in Brazil and will generate 500 jobs: Realme opens the first factory in Latin America with the capacity to produce up to 20.000 cell phones per day
- These cities are donating land to anyone who wants to live and build; see the rules and who can participate
"The amount we agreed with the staff [IMF technical team], which the board [the Fund's executive board] still needs to decide whether to approve or not, is US$20 billion. It is much higher than the amount that some people have been saying.“, said Luis Caputo, this Thursday (27), during an event for the Latin American insurance sector.
Despite the announcement, there are still no details about the IMF's requirements for releasing the funds. The Argentine government is also negotiating other loans with the World Bank, the Inter-American Development Bank (IDB) and the Development Bank for Latin America and the Caribbean (CAF). The idea is to expand sources of international financing and strengthen the country's foreign exchange position.
Exchange rate pressure accelerates search for dollars in Argentina
Caputo's announcement came just days after he refused to provide information about negotiations with the IMF. According to the director of the Argentine Public Debt Observatory, Alejandro Olmos Gaona, the minister tried to calm the financial market after days of strong pressure on the exchange rate. According to him, in one month the government spent US$1,4 billion to contain the rise of the dollar, without success.
"In one month, $1,4 billion was spent to calm the currency market, and now the dollar continues to rise. This statement by the minister certainly, as he said, aims to calm the exchange rate and the markets a little.”, said Olmos.
He believes that the government is trying to maintain an artificially low exchange rate by selling dollars on the market, and that this requires reserves.
"The government desperately needs dollars to strengthen the Central Bank and continue to control inflation [by injecting dollars into the economy], because this is the only element that has given President Milei much support. What is not known is how much they will send, what conditions they will impose and what they will do with this money afterwards.”, commented the expert.
Inflation slows down, but instability in the Milei government persists
Inflation in Argentina, which reached 287% per year in March 2024, fell to 66% per year in February 2025. Even so, the economic scenario remains unstable. The expert points out that the Central Bank's reserves have been falling continuously, making it difficult to maintain a stable exchange rate.
Furthermore, there are rumors that the IMF may demand the end of exchange rate controls, such as the limit on the purchase of dollars by Argentine citizens.
Currently, each person can only buy up to $200 per month. The potential change is leading many Argentines to seek more dollars on the market, which further increases pressure on the financial system.
Government wants to “clean up” Central Bank reserves
If the deal is closed by mid-April, it will be the third loan of its kind since 2018, when Mauricio Macri's government signed a $56 billion contract with the Fund.
Milei's current proposal aims to "clean up" the Central Bank's reserves by replacing Treasury bonds with dollars. This would mean that the debt would no longer be with the Central Bank and would be transferred to the IMF.
Caputo argues that the operation would not increase the country's debt and would help to give greater stability to the local currency, the Argentine peso.[The money] is not to finance spending, nor to finance deficits, but to recapitalize the Central Bank's assets. What we seek with this agreement is that we can rest assured that, finally, the pesos have the backing of the Central Bank.”, He stated.
The expectation is that, with the new loan, the Central Bank's reserves will rise to US$50 billion. Currently, the value is around US$26 billion.
For comparison purposes, the Central Bank of Brazil closed the year 2024 with reserves of US$ 329,7 billion.
Experts warn of risks and dependence
Despite the government's optimism, historian Alejandro Olmos sees risks in the operation. He criticizes the idea that the debt with the IMF does not represent a problem because it is not considered a nominal increase. For him, owing money to the Central Bank is different from owing money to an international organization.
“It is not the same duty to the Central Bank, which is part of the State structure, which does not make demands, does not ask for adjustments. Furthermore, the debt with the Central Bank can be permanently refinanced. The IMF, on the other hand, establishes very strict conditions, requires economic regulations, monitors and controls the country’s economy.”, said Olmos.
Argentina's public debt currently stands at US$471 billion, with an annual interest cost of US$22 billion. The expert points out that, unlike Argentina, Brazil's debt is mostly denominated in local currency, which makes it easier to pay off and roll over liabilities.
Uncertain future of Argentina's debt
For Olmos, continuing to go into debt is not sustainable. He advocates a structural change in the way the country deals with its public finances.
"The problem is that the economic powers, economists, and theorists insist that the only possible way for a country to develop is through debt. They believe that the only solution is to continue getting into debt, and unfortunately, Argentina's history shows that all of these agreements with the IMF have always failed.“He said.
Still, there are those who believe that the situation could improve. The exploitation of oil and gas reserves in the Vaca Muerta region is seen by some sectors as a possible source of future resources. This could help the country meet its commitments to international creditors.
Olmos, however, criticizes the lack of a long-term plan. “What happens is that these are short-term policies, there is no state planning for sustainable development,” he concluded.
Argentina is experiencing another chapter in its complex relationship with the IMF. Throughout its history, the country has signed 23 agreements with the Fund. The current one, if approved, will be another important move by the Milei administration in an attempt to stabilize the economy. But the effects, positive or negative, are yet to come.
With information from Agência Brasil.
