Argentina has made significant strides in terms of macroeconomic stabilization, and bolstered by a new IMF program, the short-term outlook remains broadly favorably, despite the approaching congressional elections in October and the concomitant risk of policy slippage. Since taking office in December 2023, the government of President Javier Milei has implemented a very substantial fiscal adjustment and broader structural reform. This allowed Argentina to reach a new agreement with the IMF in April, which commits the government to continued fiscal discipline, a liberalization of exchange rate policies, and structural reform. The new program will also provide Argentina with foreign-exchange liquidity, thus making the external financing outlook much more manageable. In the context of the IMF program, Argentina abolished its crawling peg exchange rate regime, which risked exacerbating peso overvaluation and balance-of-payments problems and adopted a floating FX regime within a pre-determined band.
> In 2024, the Milei government implemented a very significant front-loaded fiscal adjustment of 5% of GDP, including significant subsidy cuts. Argentina registered a primary surplus of 1.8% of GDP in 2024. This represented a sharp improvement compared to a primary deficit of 2.8% of GDP in 2023.
> In April 2025, the IMF approved a 48-month Extended Fund Facility (EFF) arrangement worth $20 billion, including an immediate disbursement of $23 billion. The agreement also helped secure further funding from multilateral lenders (e.g. World Bank) and bilateral lenders (e.g. China), thus greatly reducing near-term external financing risks, not least by rendering scheduled IMF repayments related to its previous $44 billion program more manageable.
> Following a full-year decline in 2024, real GDP growth is set to reach 5.5% this year, before converging to 3% over the medium term in the context of continued structural reform, according to the IMF. The IMF also projects inflation to fall to around 20% year-on-year by end-2025 and single-digits in 2027, even though inflation will remain high by international standards.
> The government has committed to generating higher primary surpluses in the next few years. The surplus is set to increase from 1.25% of GDP in 2025 to 2.5% of GDP over the medium term. This will require continued spending restraint and revenue reform, including changes to the tax system, revenue sharing and the pension system.
> Federal government debt amounted to 85% of GDP in 2024. The IMF judges public debt to be sustainable, though not with a high probability. Gross financing requirements amount to a high 8% of GDP (excluding intra-government debt service).
> The IMF projects the current account to register a deficit this year due to deteriorating terms-of-trade, strong domestic demand and a further easing of transactions on the current account. In the absence of increased capital account inflows, Argentina will find it difficult to significantly increase FX reserves, not least because the government’s access to international capital markets will remain constrained, the recent issuance of a local-law dollar bond repayable in peso notwithstanding.
> Argentina has committed to rebuilding FX reserves, limit overvaluation risk to regain international market access in the context of a floating exchange rate and capital account convertibility. The SBA foresees net international reserve accumulation of $4 billion (performance criterion).
> Argentinian household own an estimated $270 billion worth of assets held abroad and the corporate and the financial sector are in relatively good shape, taking advantage of macroeconomic stabilization.
> Congress remains highly fragmented in terms of party affiliation and the government does not command any majorities. The government and its allies control only 85 out of 257 seats in the lower house, compared to 104 seats controlled by the opposition and 68 independents. In the Senate, the government holds 13 out of 72 seats in the Senate, compared to the opposition’s 34 seats and 25 independents.
> Milei’s approval ratings have remained relatively unchanged since coming to office. As of March, 47% of respondents approved of the president’s performance, and 49% disapproved of the president’s performance. This compares to an approval rating of 49% and a disapproval rating of 48% in January 2024, according to the Council of the Americas.
> De facto, the BCRA is one of the least independent central banks, compared to other emerging, let along advanced economies. Successive governments forced the central bank to support government finances and monetize fiscal deficits. The Milei government has not put forward any legislative proposals to make the central banks more independent.
> In April 2025, the IMF approved a 48-month Extended Fund Facility (EFF) arrangement worth $20 billion, including an immediate disbursement of $23 billion. The agreement also helped secure further funding from multilateral lenders (e.g. World Bank) and bilateral lenders (e.g. China), thus greatly reducing near-term external financing risks, not least by rendering scheduled IMF repayments related to its previous $44 billion program more manageable.
Maintaining fiscal discipline and allowing for a timely adjustment of the exchange will be key to further progress toward macroeconomic stabilization and gaining access to international financial markets. The IMF agreement commits the Milei government to continued fiscal discipline, the liberalization of exchange restrictions and increased exchange rate flexibility, and structural reform aimed at making more flexible and efficient product and labor markets. Given Argentina’s long history of fiscal profligacy, the monetization of fiscal deficits and exchange controls, maintaining fiscal discipline is critical to IMF program compliance and macroeconomic stabilization. Only through extended fiscal discipline will Argentina be able to put public finances on a sustainable, rein in inflation by overcoming fiscal dominance (central bank financing of fiscal deficits) and rectifying its balance-of-payments vulnerability. The IMF reckons that if Argentina faithfully implements the IMF program, the government will regain international market access by early 2026. Low net international reserves remain Argentina’s Achilles’ heel from a financial and balance-of-payments perspective. Argentina needs to generate balance-of-payments surpluses, through current or capital account surpluses, to accumulate FX reserves to reduce external financing risks and gain access to private capital markets. This is why allowing for time peso depreciation will be key to successful program implementation.
> Following a full-year decline in 2024, real GDP growth is set to reach 5.5% this year, before converging to 3% over the medium term in the context of continued structural reform, according to the IMF. The IMF also projects inflation to fall to around 20% year-on-year by end-2025 and single-digits in 2027, even though inflation will remain high by international standards.
> The government has committed to generating higher primary surpluses in the next few years. The surplus is set to increase from 1.25% of GDP in 2025 to 2.5% of GDP over the medium term. This will require continued spending restraint and revenue reform, including changes to the tax system, revenue sharing and the pension system.
Argentina’s economic and financial position remains vulnerable, and a significant deviation from IMF program target in the context of less disciplined fiscal policy would cast doubt on macro stabilization. Last year’s very significant fiscal adjustment was facilitated by the electorate’s concerns about high inflation and the new president’s popularity. However, demands for increased fiscal spending will over time resurface, not least in the context of the approaching congressional (2025) and presidential (2027) elections. The risk of fiscal slippage will then increase, while the government will be inclined to allow for a timely and necessary adjustment of the currently overvalued exchange rate, as this risk rekindling inflation or at least slowing down disinflation. While measures aimed at attracting capital inflows will continue, they will not prove sufficient to offset the negative effects of an overvalued exchange rate on the balance-of-payments. But unless Argentina manages to accumulate further FX reserves, it will take longer to remove capital account restrictions, attract foreign direct investment, improve the external credit profile and re-access international capital markets. Recent reform aimed at incentivizing residents to repatriate offshore dollar deposits will attract only limited interest, given the uncertainty about future policy changes. Similarly, pushing through wide-ranging structural reform, including structural fiscal and regulatory, and do so sustainably will be very difficult given the lack of congressional majorities and an opposition largely unwilling to cooperate with the president. While the IMF program is unlikely to move off-track dramatically in the run-up to the 2025 congressional elections, the government will seek to avoid a broader peso adjustment so as not to weaken its electoral prospects. The risk to fiscal discipline and a renewed build-up of external imbalances will increae further in the run-up to the 2027 presidential elections.
> Federal government debt amounted to 85% of GDP in 2024. The IMF judges public debt to be sustainable, though not with a high probability. Gross financing requirements amount to a high 8% of GDP (excluding intra-government debt service).
> The IMF projects the current account to register a deficit this year due to deteriorating terms-of-trade, strong domestic demand and a further easing of transactions on the current account. In the absence of increased capital account inflows, Argentina will find it difficult to significantly increase FX reserves, not least because the government’s access to international capital markets will remain constrained, the recent issuance of a local-law dollar bond repayable in peso notwithstanding.
> Argentina has committed to rebuilding FX reserves, limit overvaluation risk to regain international market access in the context of a floating exchange rate and capital account convertibility. The SBA foresees net international reserve accumulation of $4 billion (performance criterion).
> Argentinian household own an estimated $270 billion worth of assets held abroad and the corporate and the financial sector are in relatively good shape, taking advantage of macroeconomic stabilization.
Lacking congressional majorities, the president will continue to face governability challenges, particularly if president’s approval ratings decline and the electorate’s concern shift from high inflation to wages and employment. In the short term, strong economic growth will limit the pressure to relax fiscal policy, but it will exacerbate balance-of-payments related challenges due to a deteriorating current account. President Milei has been able to push through a significant fiscal adjustment, largely by decree, structural reform thanks to his popularity. However, should the president’s popularity suffer, congressional opposition to reform will strengthen and the government will find it difficult to push structural reform, including IMF-mandated tax and spending reform. The government’s ability to implement reform will diminish to the extent that the president’s popularity declines. In the short term, the president can make use of his decree powers in certain areas (short-term fiscal, foreign exchange controls etc.), but even here congressional pushback would increase. The cyclical nature of Argentina’s political economy does point toward macro challenges and slower structural reform. This is not likely to destabilize relations with the IMF immediately or very significantly, or lead to a reversal of macro adjustment in the short term. In the medium to long term, however, both the reform momentum will slow, and the risk of policy slippage will increase, notably in the run-up to the 2027 presidential elections, and particularly if a credible challenger to Milei emerges. Unable to put to strengthen macroeconomic governance due to a lack of congressional majority, macroeconomic discipline will remain at the mercy of the political cycle. This means that risk to macroeconomic stabilization and stability will reemerge in the absence of broader governance reform.
> Congress remains highly fragmented in terms of party affiliation and the government does not command any majorities. The government and its allies control only 85 out of 257 seats in the lower house, compared to 104 seats controlled by the opposition and 68 independents. In the Senate, the government holds 13 out of 72 seats in the Senate, compared to the opposition’s 34 seats and 25 independents.
> Milei’s approval ratings have remained relatively unchanged since coming to office. As of March, 47% of respondents approved of the president’s performance, and 49% disapproved of the president’s performance. This compares to an approval rating of 49% and a disapproval rating of 48% in January 2024, according to the Council of the Americas.
> De facto, the BCRA is one of the least independent central banks, compared to other emerging, let along advanced economies. Successive governments forced the central bank to support government finances and monetize fiscal deficits. The Milei government has not put forward any legislative proposals to make the central banks more independent.