The International Monetary Fund announced on Tuesday that it has struck a preliminary agreement with Argentina on a $20 billion bailout, delivering a welcome respite to President Javier Milei as he works to overhaul the country’s old economic order.
The rescue plan still needs final approval from the IMF’s executive board.
The board will meet within the next several days, according to an IMF statement.
The fund’s long-awaited announcement provided a lifeline to President Milei, who has reduced inflation and stabilized Argentina’s struggling economy with free-market austerity measures.
This comes at a critical moment for South America’s second-biggest economy.
Pressure had been mounting on Argentina’s rapidly depleting foreign exchange reserves as the government tightened rules on money-printing and burned through its scarce dollars to prop up the wobbly Argentine peso.
The new funds give Milei a serious chance of loosening Argentina’s tight foreign exchange controls, which might help convince markets that his policy is sustainable.
For the past six years, capital controls have discouraged investment, prohibiting businesses from moving earnings abroad and assuring the central bank’s cautious handling of the peso, which is pegged to the dollar.
Argentina owes the IMF more than $40 billion after taking out 22 loans since 1958.
The majority of IMF funding have been used to repay the IMF itself, earning the organisation a bad reputation in Argentina.
