Three major financial institutions are investing in Argentina’s economic recovery, which is about to settle.
Argentina has won $42 billion in medium-term funds from the International Monetary Fund (IMF) and two other financial institutions.
The IMF Executive Committee approved a $2 billion relief package that will be administered over the next four years late Friday.
The World Bank has also announced a $12 billion support package for Argentina, saying the Inter-American Development Bank (IDB) will provide up to $10 billion for public and private sector funding. Both are planned for three years.
President Javier Miley announced on Friday that he will lift most of Argentina’s strict capital and currency controls from Monday as part of a contract to secure enormous funding transactions.
“Today, we are breaking the cycle of disillusionment and we are beginning to move forward for the first time,” he said on national television while on the ministerial side. “We have forever eliminated the control of the exchange rates of the Argentine economy.”
Capital management, known in Argentina as “El Sepo” or “Clamp,” was imposed by a previous administration in 2019 and aims to prevent further financial downfall and capital flights that the country has dealt with for many years.
Control rounded out the ability of individuals to buy US dollars, creating a black market that is widely used by citizens. They also restricted companies’ access to dollars and discouraged foreign investments that Milei needed.
The Argentina central bank is now aiming to allow the peso to trade within the so-called currency band, rather than pinning the troubled currency in the dollar.
According to the central bank, the band ranges from 1,000 to 1,400 pesos per greenback, expanding 1% per month.
In announcing its latest support package, the IMF said the program “is expected to promote further official funding from multilateral sources” and “try to promote timely returns to international capital markets.”
“The program supports the pathway to entrenching macroeconomic stability, strengthening external sustainability and laying the foundation for stronger and more resilient growth,” and its key pillars include “maintaining a strong fiscal anchor, moving to a more robust financial and FX administration.”
The organization praised the Argentinean authorities’ new commitment to the zero vacancy budget target, which brought the first fiscal surplus in nearly two decades.
However, in order to achieve the surplus, Mairay fired tens of thousands of national workers, and his overhaul hit the population hard, including increasing the level of poverty.
