Dollar shortage still looms after Argentina buys time at International Monetary Fund

Argentina bought itself time at the International Monetary Fund this week, but President Javier Milei still faces a hard-currency shortage that he’ll have to tackle before elections next year.

After reaching deals with the World Bank and the Inter-American Development Bank (IDB), in addition to repos and local debt emissions and upcoming privatisations of state-owned companies, Economy Minister Luis Caputo has all but completed his financing needs for this year. 

However, in 2027, he has more than US$30 billion of debt payments coming due, as well as an election that is sure to test Milei and the Central Bank.

“The market has completely priced in that Argentina will pay bond maturities,” said Ramiro Blazquez, Latin America analyst at StoneX. “The problem is the election.”

Last April’s US$20-billion deal with the Washington-based lender was meant to rebuild reserves and return Argentina to overseas markets. But in October, Milei’s party came close to losing midterm elections before mounting a comeback, unleashing market panic and a run on the peso that forced the government to seek another US$20-billion lifeline from the US Treasury.

“They need to start building the 2027 buffers now to avoid the classic Argentine election dynamics, like we saw before the midterms,” said Joaquín Bagües, managing director at Grit Capital in Buenos Aires.

Milei’s government came close to issuing debt overseas in January, but baulked at the high borrowing costs. Officials said the rates failed to reflect the scale of Argentina’s economic transformation. Without access to international markets, discussions between IMF staff and Argentine authorities on reserves targets were delayed as the country needed to secure other sources of financing, according to a person with direct knowledge of the matter. The IMF programme’s second review, which was due around February, only got approved this week.

The government largely avoided dollar purchases last year to avoid weakening the peso. In January, the administration changed tack, and began buying reserves more aggressively. But those dollars flowed straight back out to service debt, leaving net reserves little changed.

“There was a huge deviation from the reserve accumulation target,” said Marina Dal Poggetto, director of Eco Go in Buenos Aires. “However, the main objective was not a formal target, but for Argentina to regain access to credit.” 

"We think the Fund has probably pushed Argentina to issue global bonds as soon as conditions allow and avoid missing any windows. That would help lift net reserves ahead of the 2027 election cycle and meet external obligations, including to the Fund, through the rest of President Milei’s term," said Jimena Zuniga, Argentina economist for Bloomberg Economics.

Argentina signed its current agreement, its 23rd IMF deal, in April 2025, of which the about US$14 billion has so far been disbursed.  

But by the time of its first review in August, it had already missed its reserves target by about US$3.6 billion, and relaxed the target going forward for another US$5 billion on top of that. 

Argentina’s latest review would unlock another US$1 billion, pending board approval, which is expected in May. The IMF said the review will not be submitted to its board until the government implements “corrective measures.”

“Going forward, our view is that through the mobilisation of this financing, through the implementation of the programme, through greater reserve accumulation, we would see a reduction in spreads and over time a timely and more sustainable access to international capital markets,” Luis Cubeddu, deputy director of the Western Hemisphere at the IMF, said Friday at a press conference during the IMF-World Bank spring meetings.

However, the IMF lost a lot of its leverage over Argentina by disbursing such a large share of its money upfront,  said Gabriel Caamaño, economist at Outlier consultancy in Buenos Aires. 

“Once the US Treasury got involved, any remaining leverage was gone,” Caamaño said.

The government ended up using US$2.5 billion of that to defend the peso amid volatility around October midterms last year. It remains unclear whether that line will remain available next year, when the continuation of Milei’s pro-market government is on the line again.

To be sure, although Milei hasn’t managed to boost reserves, he has exceeded the IMF’s targets in other respects. His government slashed the fiscal deficit by the equivalent of five percent of gross domestic product, dramatically slowed inflation and sharply reduced poverty. 

“The problem with Argentina is short-term thinking,” Dal Poggetto said. “If you don’t extend the time horizon – and ensure that whoever comes next doesn’t dismantle everything you built – you’re stuck in a loop.”