IMF backs Milei’s reforms in third review of Argentina deal

The IMF’s third review checks whether Argentina is meeting the conditions of its US$20-billion financing programme. Staff reached an agreement with the government, marking progress under the 48-month arrangement and potentially opening another payment. The review matters because Argentina remains the IMF’s largest debtor and needs financing to strengthen its financial position.

The possible disbursement is approximately US$900 million. The IMF praised Argentina’s fiscal and monetary policies, stronger external buffers and progress toward its programme targets. Net international reserves exceeded the end-June target by about US$4 billion, supporting the agreement.

The payment is not automatic. The IMF’s Executive Board must approve the review before funds are released. The board is expected to consider it in early December. Until then, the staff-level agreement signals support but does not constitute final approval or a completed disbursement.

An Extended Fund Facility, or EFF, is an IMF lending arrangement for countries facing serious or longer-lasting economic problems. It provides financing over a longer period than emergency assistance, while the borrowing government follows an agreed economic programme. The arrangement links financial support with policy commitments and regular reviews.

Argentina’s 48-month EFF was agreed in April 2025. The country was dealing with high inflation and currency depreciation. Under President Javier Milei, the programme supports spending cuts, deregulation, disinflation and efforts to strengthen reserves. Continued IMF reviews help assess whether the government is meeting its commitments.

The financing gives Argentina additional resources while reforms are under way. It also imposes pressure to maintain fiscal discipline and improve the economy’s external position. The latest review could release about US$900 million, but only after approval by the IMF Executive Board.

Argentina’s current IMF financing programme totals US$20 billion. Separately, the country owes the IMF approximately US$56.8 billion, making Argentina the institution’s largest debtor. These figures show both the scale of the country’s financing needs and the importance of maintaining IMF support while reforms continue.

The Central Bank has purchased nearly US$16 billion in foreign currency so far this year. The Treasury has also raised more than US$5 billion in foreign currency through domestic markets. Together, these actions help build reserves and provide resources for meeting financial obligations and managing external pressures.

The IMF said net international reserves exceeded the programme’s end-June target by approximately US$4 billion. Stronger reserves can improve confidence and provide a buffer against shocks. However, Argentina’s large debt means the government must keep improving its fiscal and monetary position.

President Javier Milei’s economic strategy centres on reducing public spending, deregulating the economy and bringing inflation under control. The government is pursuing these policies with IMF backing. The broader aim is to restore fiscal discipline, strengthen Argentina’s external position and create conditions for investment and growth.

Fiscal policy has supported a primary surplus, while monetary policy focuses on reducing inflation and accumulating reserves. The Central Bank has purchased nearly US$16 billion in foreign currency this year. It is also preserving exchange-rate flexibility within the existing currency-band system. The government has approved US$76 billion in investments under RIGI.

The IMF also supports reforms in trade, labour, investment and capital markets. These include deepening domestic capital markets, expanding long-term financing and advancing infrastructure concessions. The strategy has improved some financial indicators, but spending cuts have triggered protests and the benefits have not yet produced a sustained wider recovery.

A primary fiscal surplus occurs when government revenue exceeds spending before interest payments on debt. Foreign-exchange reserves are holdings used to pay for external obligations and support confidence in a country’s currency. A currency band is a system that allows the exchange rate to move within defined limits rather than being completely fixed.

These tools fit Argentina’s programme. The government has committed to a primary surplus of 1.4 percent of GDP in both 2026 and 2027. Net international reserves exceeded the end-June target by about US$4 billion. The Central Bank will keep exchange-rate flexibility within the existing band while accumulating reserves.

Surpluses can limit new borrowing, reserves provide a buffer, and a band can help manage currency movements. The IMF said the policies have supported disinflation and strengthened Argentina’s external position. Meeting the targets would produce a fourth consecutive year of primary surpluses and overall fiscal balance.

Lower inflation can improve stability, but it does not automatically restore household purchasing power or economic growth. If public spending remains compressed, consumers spend less and household debt defaults continue rising, businesses may face weaker sales. That can slow production, hiring and investment even as price increases moderate.

Argentina already shows these pressures. Consumer demand remains weak, and mortgage defaults have tripled over the past year to 12.8 percent, their highest level in two decades. The IMF also cut its 2026 growth forecast to 2.1 percent from 3.5 percent, citing weak activity, subdued domestic demand and restrictive financial conditions.

If these trends continue, stabilisation could remain socially painful and fail to become a broad recovery. Higher defaults could strain households and lenders, while weak demand could undermine job creation. The government therefore faces a difficult balance: preserving fiscal discipline while allowing stronger activity and household recovery.

Governments seek IMF financing when economic pressures exceed their available resources. Loans can help pay external obligations, support reserves and prevent a financial crisis while a country changes its policies. They can also reassure other lenders that an adjustment programme is being monitored and funded.

Argentina’s EFF provides financing while Milei’s government cuts spending, reduces inflation and strengthens its external position. The programme requires primary surpluses of 1.4 percent of GDP in 2026 and 2027. It also supports monetary discipline, reserve accumulation and reforms in trade, labour, investment and capital markets.

This assistance has a cost. Spending cuts backed by the IMF have prompted repeated protests, while consumer demand remains weak and defaults have risen. Financing can therefore create time and stability, but it does not guarantee a quick recovery. Argentina must meet its commitments while dealing with social hardship and weaker-than-expected economic activity.