The International Monetary Fund reached preliminary agreement with Argentina on a $20 billion four-year bailout deal for the embattled country as President Javier Milei continues to make progress in turning around the economic fortunes of South America’s second largest economy. File photo by Shawn Thew/EPA-EFE
The International Monetary Fund said it had reached an agreement with Argentina on a $20 billion four-year bailout arrangement for the embattled country, South America’s second-largest economy.
The deal would see the IMF extend the so-called Extended Funding Facility loan to support a comprehensive economic program aimed at building on progress Argentina has made in stabilizing its economy and getting rampant inflation down and kickstarting economic activity, the IMF said in a news release Wednesday.
The “staff level” proposal was subject to approval by the fund’s executive board which is expected to meet to consider the plan in the next few days.
“The program supports the next phase of Argentina’s homegrown stabilization and reform agenda aimed at entrenching macroeconomic stability, strengthening external sustainability, and unlocking strong and more sustainable growth, while also managing the more challenging global backdrop,” said the IMF.
The breakthrough is set to vindicate the tough economic reform program of populist President Javier Milei has been pursuing since coming to office in December 2023 on a promise to reverse decades of Peronist-style government that he said had ruined Argentina and replace it with a small state that gets out of people’s way.
The bailout comes just in time for Milei who has battled down the country’s fiscal deficit, which was running at 15%, by cutting government departments, massive cuts to government spending and state subsidies and devaluing the currency.
With foreign exchange reserves running from intervening to support the dollar-pegged Argentine peso, fears were mounting that events could blow Milei off course without help from the IMF and the country would be unable to service its foreign debt.
But the fresh funds will assist Milei in attracting investment and boost market belief in his ability to follow through on his reforms, especially reducing foreign exchange controls that prevent companies from taking their profits out of the country.
Milei’s free market-style reforms flew in the face of the policies of previous governments going back decades which had consistently refused to comply with IMF demands and spent way beyond their means financed by money printing that saw inflation top 100% in the February before Milei’s election win.
Argentina has received more bailouts than any other country with 22 IMF loans over the past six decades and with more than $40 billion of that still outstanding much of the money it is set to receive from the fund will, as in the past, go toward repaying the debt.
