IMF announces preliminary agreement for $20 bn Argentina loan

WASHINGTON: The International Monetary Fund on Tuesday announced it had reached a preliminary agreement with Argentina on a $20 billion four-year loan arrangement to support a “comprehensive economic program.”

The multilateral lender said it had reached a staff-level agreement on the program that was subject to approval by its executive board, which is expected to consider the proposal “in the coming days.”

“The agreement builds on the authorities’ impressive early progress in stabilizing the economy, underpinned by a strong fiscal anchor, that is delivering rapid disinflation and a recovery in activity and social indicators,” said an IMF statement.

President Javier Milei’s government had earlier announced that Argentina — the IMF’s biggest debtor by far — was in talks over the new loan, which comes on top of the $44 billion it already owes.

The country’s previous loan, signed in 2018, was the biggest ever by the Washington-based lender of last resort to Argentina, a serial defaulter.

In all, the IMF has bailed out South America’s second-biggest economy 22 times.

Argentine Economy Minister Luis Caputo said last month that the new money would be used to recapitalize the country’s central bank.

Milei said that the loans would increase the central bank’s reserves to “at least” $50 billion, compared to $26.23 billion at present.

The IMF said the program “supports the next phase of Argentina’s homegrown stabilization and reform agenda.”

The prospect of another IMF loan has caused a run on the peso, prompted by fears that the new deal could entail a possible devaluation which Milei has rebuffed.

The sell-off of Argentina’s currency drained reserves by more than $1.2 billion in late March.

Self-described “anarcho-capitalist” Milei came to office in December 2023 pledging to cut spending, tame inflation and fix a steep fiscal deficit.

In the last six months, the peso has fallen about ten percent to the US dollar.

Argentina has one of the highest inflation rates in the world, but under Milei it has fallen from 211 percent year-on-year at the end of 2023 to 84.5 percent in January.

The president has said a new IMF deal will help ensure that “inflation is only a bad memory.”

Caputo said last month Argentina was also negotiating loans with the World Bank and the Inter-American Development Bank.