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Argentina has agreed to ease strict currency controls as part of a $20 billion loan from the IMF as pressure is placed on libertarian president Javier Mairi’s plan to revive the economy.
The country’s central bank on Friday said it would lift restrictions restricting the movement of non-Argentina dollars for individuals while maintaining some restrictions on businesses.
It also partially floats the official exchange rates of PESO, allowing it to fluctuate from 1,000 to 1,400 pesos from 1,400 pesos. This replaces a controversial policy that has actually dramatically strengthened the peso by undervaluing the currency only 1% a month, despite a much higher monthly inflation rate.
Economy Minister Lewis Caputo denied that the change constituted a devaluation of the peso. He said the IMF will hand over its first $12 billion to Argentina on Tuesday, and another $2 billion in June.
“It’s true that such a large initial payment is unprecedented, but it’s also unprecedented that the country has met everything (the fund’s financial demands) in a year,” Caputo said.
The IMF board confirmed approval of the transaction late Friday, but the World Bank and the Inter-US Development Bank announced separate funding packages worth $12 billion and $10 billion, respectively.
Argentina’s 23rd IMF deal, which is a serial default, has become increasingly urgent for Mailey. The former economist has curbed severe inflation, eliminated chronic budget deficits and ended the recession, but he has failed to lift Argentina’s strict currency controls or restructure the central bank’s reserves needed to support the peso and pay debts.
It has vulnered Argentina to the need for a sudden official devaluation that could reignite inflation ahead of the October midterm elections and undermine Mailey’s support. The market disruption caused by US President Donald Trump’s tariffs increased the risk and struck the prices of Argentinean assets and its soy and oil exports.
The central bank has been forced to spend $2.5 billion to maintain the peso within a month, but the currency’s black market exchange rates have weakened sharply since early March, with the gap closely monitored at the official rate doubled to 24%.
Fabio Rodriguez, director of Argentine Financial Consultancy M&R Associates, said changes to the currency strategy, a key tool to reduce price pressure, would “force the government at least to accept a suspension to defeat inflation.”
“They need to explain that to their voters.”
Progress on inflation is slowing down. The National Bureau of Statistics said on Friday that it far surpassed economists’ forecasts, but seasonal factors contributed to it, but on Monday it rose to 3.7% in March, and to 3.7% in March.
US Treasury Secretary Scott Bescent is scheduled to visit Argentina on Monday with a clear show of support for Mailey from Trump, a close ideological ally who has gone through some sort of swing in negotiations as the leader of the IMF’s biggest stakeholders.
China also provided relief on Thursday by updating its $5 billion tranche of Argentina’s central bank and $1.8 billion currency swap. The Trump administration said this month it hopes the swap will “end.”
Argentina is already the IMF’s biggest debtor, as more than $400 billion failed to stabilize the economy against its latest programmes in 2018 and 2022.
However, fund director Christarina Georgieva said earlier this month that Mairay’s performance “earned” him a massive payment.
Malcolm Dawson, head of Global X ETFS’ emerging market strategy, said that transactions that provided “exchange rate clarity” should unlock more private investments in Argentina. “Investors are rightly concerned about monetary policy, so this opens the door for businesses to start putting their money back into the country. This will make Milei’s plans sustainable.”
