IMF agreement clears way for release of US$900mil for Argentina

The International Monetary Fund (IMF) has reached a staff-level agreement with Argentina on the third review of the country's bailout, according to a report Tuesday. This agreement could potentially unlock about US$900 million for Argentina, but it is contingent upon approval by the IMF's executive board.

The 2025 agreement builds upon a previous extended fund facility agreement with the IMF, worth around US$20 billion over four years. Implemented by President Javier Milei, a series of wide-ranging reforms have been introduced, involving the slashing of public spending and efforts to control inflation. However, these social spending cuts have faced significant public resistance, leading to frequent protests.

Since taking office in December 2023, Milei's economic policies have yielded notable results, including a significant drop in inflation from triple digits to the current rate of 33.5%. The IMF commended Argentina's improved fiscal buffers and foreign exchange reserves, as well as the government's structural reforms in trade, labor, investment, and capital markets. These reforms are said to be fostering a more efficient and market-based economy.

The agreement for the disbursement of the latest tranche of the bailout requires Argentina to commit to a primary surplus of 1.4% of GDP for the current and next year. Additionally, the country's central bank is tasked with implementing measures to support disinflation and reserve accumulation while allowing for exchange rate flexibility within a specified band.

Priority will be given to deepening domestic capital markets and expanding access to longer-term financing as part of the reform agenda. Argentina remains the IMF's largest debtor, with US$1.2 billion in debts to the Fund due this year and a further US$7.8 billion due next year. Despite Milei's government's success in curbing inflation, economic performance remains subpar in other areas, such as anemic consumer activity and soaring debt defaults, which have tripled to 12.8% in the past year - the highest level in two decades.

Economic growth has also remained sluggish, and earlier this month, the IMF downgraded its GDP expansion forecast for Argentina to 2.1% in 2026.