Argentina has secured a $20 billion bailout package from the International Monetary Fund (IMF), allowing President Javier Milei to lift most capital controls and stabilize the country’s economy. The deal marks a significant step forward for Milei’s libertarian program to normalize Argentina’s economy after decades of unbridled spending.
The IMF’s executive board approved the bailout package, praising Milei’s austerity program and zero-deficit fiscal policy as “consolidating impressive initial gains” and addressing “remaining macroeconomic vulnerabilities.” The fund will provide a lifeline to Argentina’s dangerously depleting foreign currency reserves over the next four years.
Under the deal, Argentina will allow its currency to trade within a so-called currency band, rather than floating freely. The band will range from 1,000 to 1,400 pesos per dollar and expand by 1% each month. This move breaks with Milei’s previous resistance to lifting capital controls, which has been a major hurdle for foreign investors.
Milei hailed the deal as “the foundation for sustained, long-term growth” and promised that inflation will disappear. However, analysts warn that scrapping capital controls could unleash years of pent-up demand for US dollars and spark a currency run. The move is also seen as bold timing, given the local market turmoil sparked by US President Donald Trump’s tariffs.
The IMF deal is part of a broader effort to stabilize Argentina’s economy, which has struggled with high inflation, chronic weakening peso, and serial defaults. Milei has delivered Argentina’s first fiscal surplus in almost two decades through a series of painful reforms, including scrapping subsidies and price controls, firing state workers, and halting the central bank’s reliance on printing pesos.
Despite these efforts, analysts say that a long-term economic revival requires more than just stabilization – it needs investment and access to international capital markets. The IMF deal is seen as a step in that direction, but its success will depend on how effectively Argentina can manage the risks associated with scrapping capital controls.
Source: https://apnews.com/article/argentina-economy-inflation-milei-imf-consumer-prices-currency-8ca2cc2b1a2b025e8913f8ae85cd7170