Final negotiations between Argentina and the IMF are underway for a new loan, with Finance Minister Luis Caputo hopeful for a $20 billion package. The IMF has not yet confirmed the loan size, focusing instead on a significant financing plan to bolster Argentina’s foreign reserves amid peso pressures. President Javier Milei reassured that the loan would not lead to currency devaluation. This aid program aims to refinance Argentina’s substantial debt to the IMF, which remains the country’s largest creditor.
Final Negotiations on Argentina’s Loan with the IMF
The discussions between the International Monetary Fund (IMF) and the Argentine government have reached a critical stage, as the IMF’s board is preparing to establish the size of a new loan. Argentine Finance Minister Luis Caputo has expressed hopes that this loan will total $20 billion.
In response to inquiries about the anticipated loan amount, Caputo confirmed, “the amount was 20 billion dollars,” while also mentioning that negotiations for an “additional amount” are taking place, particularly with the World Bank (WB) and the Inter-American Development Bank (IDB). However, the IMF has yet to officially validate the size of the loan currently being negotiated.
IMF’s Stance and Argentina’s Economic Goals
During a recent press briefing in Washington, IMF communications director Julie Kozack refrained from delving into specifics about the ongoing discussions, stating, “I can simply confirm that the scope of the final program for Argentina will be determined by our board.” She emphasized that the talks are concentrated on a substantial financing package.
When asked for further details, an IMF representative declined to comment on the potential size of the aid program, reiterating that the focus is on “a program of importance.” The Argentine government aims to bolster its foreign currency reserves amid significant pressure on the peso, which resulted in a loss of over $1.2 billion in reserves last week.
Finance Minister Caputo sought to instill confidence, stating, “When looking at the gross reserves and adding what comes from the IMF, these reserves will increase by about $50 billion.” He clarified that the loan’s purpose is not to fund expenditures but to strengthen the Central Bank’s assets.
Caputo expressed optimism, asserting that with the new funds, “we will end the pressure on the dollar in Argentina.” The ongoing pressure on the peso and its potential impact on inflation present challenges for the ultraliberal government of Javier Milei, who has prioritized inflation control as a key achievement. “We are convinced that Argentina will turn the situation around; we have avoided the crisis,” he stated.
President Javier Milei later reaffirmed over radio El Observador that this loan would not result in “any case” of devaluation, emphasizing that “there is a lack of pesos here, there is no lack of dollars.” Establishing an aid program involves regular interactions between evaluation teams and the IMF board before a final agreement is proposed to the Argentine government.
Negotiations for this new aid program began in November, following the conclusion of the previous program in March 2022 under the administration of Alberto Fernandez, which is set to expire at the end of 2024. The upcoming program, known as “extended payment facilities,” aims to refinance Argentina’s debt, facilitating the repayment of a record loan provided by the IMF to the government of Mauricio Macri in 2018.
On March 19, the Argentine Parliament approved the finalization of this new aid program, deemed essential by the government to avert national bankruptcy. Over his 15 months in office, the self-described “anarcho-capitalist” economist Milei has restructured public accounts through stringent austerity measures, despite the high social cost, and has successfully reduced inflation from 211% at the end of 2023 to 66% currently. Argentina remains the largest debtor to the IMF, surpassing countries such as Ukraine, Egypt, and Ecuador.