Argentina Finalizes $20 Billion IMF Deal and Eases Currency Controls
BUENOS AIRES: Argentina has reached a significant agreement with the International Monetary Fund (IMF), securing a $20 billion, four-year Extended Fund Facility. In a bold policy shift ahead of the deal’s confirmation, the country has also relaxed major currency controls that have long limited access to foreign exchange.
Under the agreement, the IMF will release $12 billion by Tuesday, followed by an additional $2 billion in June. The IMF noted the program aims to attract further support from international institutions and eventually enable Argentina to return to global financial markets.
Key aspects of the plan include establishing a solid fiscal foundation and moving toward a more flexible and transparent monetary policy and exchange rate system.
In a pivotal move, Argentina’s central bank announced the end of its fixed currency peg, allowing the peso to trade freely within a fluctuating band of 1,000 to 1,400 per U.S. dollar, compared to 1,074 at Friday’s close.
Additionally, the government plans to dismantle large parts of its longstanding “cepo” currency restrictions. Starting this year, companies will also be allowed to send their earnings abroad—an important step to encourage new investments.
“As of Monday, we’ll remove the foreign exchange restrictions introduced in 2019, which have hindered economic activity,” said Economy Minister Luis Caputo during a press conference.
President Javier Milei addressed the nation on Friday evening, declaring that Argentina is now “better prepared than ever to face global uncertainties.”
However, the IMF cautioned that the program faces considerable risks, especially due to rising global trade tensions and domestic challenges like political uncertainty and social instability.
Peso Devaluation Looms
The new exchange rate framework opens the door for the peso to weaken significantly—up to 30%—if it hits the lower limit of the designated band. The central bank noted that the band will widen by 1% monthly, and it retains tools to stabilize the market if needed.
This economic overhaul precedes the IMF’s final approval of what is now Argentina’s 23rd agreement with the organization. The government intends to use the incoming funds to stabilize the central bank, strengthen the currency, lower inflation, and potentially reduce taxes.
Other financial aid packages were also revealed: $12 billion from the World Bank and $10 billion from the Inter-American Development Bank.
The fresh capital comes at a crucial time, as Argentina struggles with dwindling foreign reserves, high inflation, and increasing financial risk indicators.
While these changes are designed to restore stability, analysts warn they may stir market fluctuations—especially amid ongoing global trade tensions.
“This effectively amounts to a devaluation,” said economist Ricardo Delgado, noting the move could complicate the government’s path toward the upcoming legislative elections.
“It’s surprising to see such a drastic shift in policy amid global volatility,” Delgado added.
