Argentina will get €800m to pay debt as Milei meets IMF targets

President stalled public works and cut subsidies to balance budget

The International Monetary Fund’s staff signed off on the eighth review of Argentina’s $44bn (€41bn) program, giving a key endorsement to President Javier Milei’s shock therapy six months into his government.

The deal, if backed by the IMF’s executive board, will give Argentina access to nearly $800m. The cash will allow Mr Milei to honour upcoming debt repayments to the Washington-based lender, buying him time to decide whether to continue with the current program brokered by his predecessor or negotiate a new one.

“Building on the better-than-expected performance in the first quarter – all performance criteria were met with margins – IMF staff and the Argentine authorities reached understandings on policies to continue to entrench the disinflation process, rebuild external buffers, support the recovery, and keep the program on track,” IMF staff wrote.

The staff-level agreement comes just after officials from Argentina’s economy ministry and central bank held negotiations last week with the IMF in Washington. Last month, they had received representatives from the Fund in Buenos Aires. Mr Milei and Economy Minister Luis Caputo also attended the same conference in Los Angeles as the Fund’s Managing Director Kristalina Georgieva last week.

Mr Caputo said last month that Argentina is starting talks about a new financing program that could involve fresh funds, adding that Mr Milei’s monetary and foreign exchange plans are part of the discussion. The libertarian leader has said Argentina would need about $15bn from different sources to lift a series of capital controls put in place by the former Peronist government.

The staff-level agreement comes as no surprise after Mr Milei boasted that his tough austerity measures exceed the Washington-based lender’s demands. Since taking office in December, Mr Milei delivered a quarterly primary fiscal surplus, which doesn’t take into account debt payments, for the first time in nearly two decades.

In order to produce those savings, the president has frozen public works, lowered energy and transport subsidies for consumers, and let inflation erode public wages and pensions.

Argentina’s objective of achieving a fiscal balance without net central bank financing remains intact, according to the statement. Moving ahead, the focus will be placed on improving the tax system, streamlining subsidies and strengthening social assistance.

As Argentina moves toward a new monetary regime involving currency competition, the Fund says monetary policy will continue to evolve to anchor inflation expectations and make foreign exchange policy more flexible. Restrictions and controls will continue to be eased as conditions allow, they wrote.

While Mr Milei’s tough medicine enjoys support from Washington, inflation running at nearly 300pc per year has destroyed household purchasing power, hurtling the economy into what is projected to be a 2.8pc contraction this year.

Unions and those most affected by the austerity measures have staged repeated protests in the past few months.