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Milei Government Negotiates New Loan of US$ 20 Billion with the IMF. Argentina Tries to Strengthen Reserves and Stabilize Economy. See Details of the Negotiations with the Fund
Argentina has taken another step 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 reserves of the Central Bank.
According to the Javier Milei’s government, 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 Amount and Denies Use for Public Expenses
The Minister of Economy, Luis Caputo, announced the amount of the new loan during an event for the Latin American insurance sector. He stated that the amount agreed with the IMF’s technical team still needs approval from the Fund’s board.
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“The amount we agreed upon with the staff [IMF technical team], which the board [executive board of the Fund] 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 hearing“, said Luis Caputo on Thursday (27), during the Latin American insurance sector event.
Despite the announcement, there are still no details on the IMF’s requirements to release the funds. The Argentine government is also negotiating other loans with the World Bank, the Inter-American Development Bank (IDB), and the Development Bank of Latin America and the Caribbean (CAF). The idea is to broaden the sources of international financing and strengthen the country’s currency position.
Exchange Rate Pressure Accelerates Dollar Search in Argentina
Caputo’s announcement came just days after he refused to provide information on negotiations with the IMF. According to Alejandro Olmos Gaona, director of the Argentine Public Debt Observatory, the minister tried to calm the financial market after days of intense pressure on the exchange rate. He stated that in one month, the government spent US$ 1.4 billion to try to contain the rising dollar, without success.
“In one month, US$ 1.4 billion was spent to calm the exchange market, and now the dollar keeps rising. This statement from the minister certainly, as he said, aims to calm the exchange rate and the markets a bit”, Olmos stated.
He believes that the government is trying to keep the exchange rate artificially low by selling dollars in the market, which requires reserves.
“The government desperately needs dollars to strengthen the Central Bank and continue controlling inflation [by injecting dollars into the economy], because that is the only element that has provided significant support to President Milei. What is not known is how much they will send, what conditions they will impose, and what they will do with this money afterwards”, the expert commented.
Inflation Slows, but Instability of Milei Government Persists
Inflation in Argentina, which reached 287% annually in March 2024, dropped to 66% annually in February 2025. Nevertheless, the economic scenario remains unstable. The expert points out that the reserves of the Central Bank have been continuously decreasing, making it difficult to maintain a stable exchange rate.
Moreover, there are rumors that the IMF may demand the end of controls on the exchange rate, such as the limit on dollar purchases by Argentine citizens.
Currently, each person can only purchase up to US$ 200 per month. The potential change drives many Argentines to seek more dollars in the market, which further increases pressure on the financial system.
Government Wants to “Sanitize” Central Bank Reserves
If the agreement is finalized by mid-April, it will be the third loan of its kind since 2018, when Maurício Macri’s government signed a contract for US$ 56 billion with the Fund.
Milei’s current proposal aims to “sanitize” the Central Bank’s reserves by replacing Treasury bonds with dollars. This would mean the debt would no longer be with the Central Bank and would move to the IMF.
Caputo argues that the operation would not increase the country’s debt and would help provide greater stability to the local currency, the Argentine peso. “[The money] is not to finance expenses or cover deficits, but to recapitalize the Central Bank’s asset. What we seek with this agreement is to be assured that finally, the pesos have backing at 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, the Central Bank of Brazil closed the year 2024 with reserves of US$ 329.7 billion.
Experts Warn of Risks and Dependency
Despite the government’s optimism, historian Alejandro Olmos sees risks in the operation. He criticizes the notion that debt to the IMF does not pose a problem as it is not considered a nominal increase. For him, owing to the Central Bank is different from owing to an international organization.
“It is not the same to owe the Central Bank, which is part of the state structure, which does not impose requirements, does not ask for adjustments. Additionally, the debt with the Central Bank can be refinanced permanently. The IMF, on the other hand, establishes very strict conditions, requires economic regulations, monitoring, and controlling the country’s economy”, said Olmos.
Currently, Argentina’s public debt stands at US$ 471 billion, with an annual cost of US$ 22 billion in interest. The expert emphasizes that, unlike Argentina, Brazil has its debt predominantly in local currency, which makes it easier to pay and roll over liabilities.
Uncertain Future of Argentina’s Debt
For Olmos, continuing to incur debt is not sustainable. He advocates for a structural change in how the country manages its public finances.
“The problem is that economic power, economists, and theorists insist that the only possible path for a country’s development is through indebtedness. They believe that the only solution is to keep incurring debt, and unfortunately, Argentina’s history shows that all these agreements with the IMF have always failed“, he stated.
Nonetheless, some believe that the situation could improve. The exploration of oil and gas reserves in the Vaca Muerta region is seen by some sectors as a potential source of resources in the future. This could help the country meet its commitments to international creditors.
Olmos, however, criticizes the absence of a long-term plan. “What happens is that they are conjunctural policies, there is no planning by the state for sustainable development,” he concluded.
Argentina is experiencing yet another chapter in its complex relationship with the IMF. Throughout history, the country has established 23 agreements with the Fund. The current one, if approved, will be another significant move by the Milei management in an attempt to stabilize the economy. But the effects, whether positive or negative, are yet to come.
With information from Agência Brasil.
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