Argentina is pushing for a $20 billion financing deal with the International Monetary Fund (IMF), Economy Minister Luis Caputo announced on Thursday, marking the first time an official figure has been attached to the long-discussed program. The move aims to stabilize jittery local markets amid mounting economic pressures.
The grain-exporting nation has been grappling with soaring inflation, dwindling foreign reserves, and an expanding debt burden. While Argentina has been in negotiations with the IMF for months, both sides had previously avoided specifying a target amount. If approved, this would become the country’s 23rd agreement with the IMF, reinforcing the central bank’s reserves, bolstering President Javier Milei’s libertarian administration, and mitigating debt repayment risks in the coming years.
“Our goal with this agreement is to ensure that the existing pesos in circulation are fully backed by the central bank,” Caputo stated. “This will lead to a stronger currency, lower inflation, and reduced poverty.” He confirmed that $20 billion had been agreed upon with IMF staff, though final approval rests with the Fund’s executive board.
Market Jitters and Peso Devaluation Concerns
Argentina’s financial markets have been on edge in recent weeks, fueled by uncertainty over the IMF deal and speculation about a potential acceleration in the devaluation of the peso. The currency remains tightly controlled under strict capital regulations and a managed devaluation strategy known as the "crawling peg."
To defend the peso, the central bank has been offloading record amounts of U.S. dollars, a concerning trend given that net foreign reserves are already estimated to be at least $4 billion in the red. Officials argue that a fresh IMF agreement will help replenish these reserves and pave the way for dismantling capital controls that have long hampered investment and business activity.
After taking office in late 2023, Milei implemented deep austerity measures and slashed the peso’s value by over 50% in an effort to correct years of fiscal mismanagement.
IMF and Additional Funding Efforts
Argentina remains the IMF’s largest debtor and is still repaying a $44 billion program from 2022, which replaced a failed 2018 agreement. According to sources cited by Reuters, the proposed $20 billion package would allocate around $8 billion to strengthening central bank reserves, while $12 billion would go toward repaying outstanding principal and interest owed to the IMF.
Caputo dismissed speculation that the fresh funding amount would be significantly lower, a rumor that had exacerbated market anxiety. He noted that the IMF board is expected to vote on the agreement in the coming weeks.
Beyond the IMF, Argentina is also seeking financial support from development institutions such as the World Bank, the Inter-American Development Bank (IDB), and the CAF – Development Bank of Latin America and the Caribbean to further bolster reserves.
Despite total gross reserves standing at approximately $26.25 billion, they have declined this year. The government aims to nearly double that figure with the anticipated influx of new funding.