Argentina secures $32B (44B CAD) boost, lifts currency shackles
The President of Argentina, Javier Milei, announced that his country will receive a total of $32 billion (44 billion CAD) in loans from the International Monetary Fund (IMF), the World Bank, and other institutions, which will allow the government to lift long-standing currency exchange restrictions. He declared that today marks the end of a cycle of disappointments, as the country starts moving forward once again.
Argentina negotiated with the IMF an agreement on a 48-month loan line totalling $20 billion (around 27 billion CAD), with $12 billion (16 billion CAD) to be disbursed on Tuesday. The World Bank announced a $12 billion (16 billion CAD) aid package for Argentina, Reuters reported, describing it as "signaling a strong vote of confidence in the government’s efforts to stabilize and modernize the economy."
The agreements were also announced by President Milei, who since taking office in 2023, has pursued a "chainsaw cutting" policy of public spending and implemented an economic "shock therapy" to combat rampant inflation and pull the country out of a deep financial crisis.
Milei stated that thanks to this financial injection, the Central Bank's reserves will rise to $50 billion (around 69 billion CAD), which will allow the elimination of long-standing currency exchange restrictions, known in Argentina as "cepo" (literally: shackles)
"Today, we break the cycle of disappointments and begin to move forward again. We break the last link of the chain that restrained us. We eliminate the cepo forever," said Milei in a 22-minute speech recorded in the Pink House, the presidential palace in Buenos Aires.
The Argentine Ministry of Economy and the Central Bank announced that on Monday, the limit on dollar purchases by individuals in banks and exchanges, currently $200 (277 CAD) per month, will no longer apply. Control over the official dollar exchange rate will also be relaxed, allowing it to fluctuate from 1,000 to 1,400 pesos, and these limits will gradually be widened.
22 loans for Argentina. Debt exceeds $40 billion (55 billion CAD)
The Minister of Economy, Luis Caputo, assured that lifting restrictions does not mean a devaluation of the peso. However, economists agree that the official exchange rate of the Argentine currency, which on Friday was just under 1,100 per dollar, will most likely fall and approach that of the black market, where on Friday the dollar was traded for 1,375 pesos.
Since 1958, Argentina has received 22 loans from the IMF, and its debt to the fund exceeds $40 billion (55 billion CAD). Over the past year, Milei's radical reforms have managed to control triple-digit inflation and achieve a budget surplus, but this has come at the cost of worsening the financial situation of the lowest-earning Argentines, especially retirees and pensioners.
