The IMF wants its money back

It’s a busy time to be president of Argentina. When not batting away his inner circle’s corruption scandals, or hopping across the border to campaign for ideological allies, Javier Milei is rolling out the red carpet for dignitaries back home. 

We’ll lean into that last point today, because Milei is now hosting International Monetary Fund (IMF) chief Kristalina Georgieva. Who cares, you might ask?

Well Argentina and the IMF have more history than a guided tour at Hampton Court: decades of populist politics and boom-bust economics have seen Argentina lean on the IMF a record 23 times, culminating in 2018’s historic $57B bailout that’s now left Argentina the fund's top borrower, by far.

And that all set the stage for boofy-haired, chainsaw-wielding libertarian Milei to sweep to power in late 2023, pledging economic shock therapy to end the cycle.

So with that backstory, it’s worth a quick look at what’s now behind Georgieva’s trip: yes, she’s there to check in on Argentina’s economy, a little like John Gotti turning up with a baseball bat “just to see how the business is doing…”.

But it turns out Georgieva can leave the bat in the Cadillac because Milei actually has plenty of good news to share: 

• Annual inflation is now at 33.5%, down from 2024’s peak of over 200%

• He just scored Argentina’s third credit rating upgrade in three months

• Argentina’s US bond spread is now at its lowest in eight years, and

• He’s doubled Argentina’s gross central bank reserves to ~$49B. 

That’s partly why Georgieva just appeared next to Argentina's central bank chief and declared “Argentina today is in a strong position”, adding “I’m not worried”. We like to think Milei, the self-described anarcho-capitalist who famously campaigned on a pledge to torch Argentina’s entire monetary system, blinked back a manly tear.

So then what’s with Georgieva’s Cadillac and baseball bat out front?

Milei’s wins notwithstanding, it’s not all Malbec and empanadas in Argentina.

First, there’s still the economy itself, with Milei’s budget-balancing welfare cuts also fuelling a cost-of-living crisis while household loan delinquencies soar. Growth is also uneven, plus tax revenues (real terms) actually fell the first half of the year, though it’s worth noting this initial fall is partly by design — Milei ditched distortive but revenue-raising taxes in hopes of more growth and investment longer term. 

Second, look at Georgieva’s itinerary: that ominous Cadillac is now rolling into Vaca Muerta for a look at one of the world’s largest shale reserves. Long stalled by years of macro chaos and currency controls, Milei has now hit the gas with his new ‘RIGI’ law pledging regulatory and FX stability, in turn attracting the capital for Argentina’s final missing piece: a 437km (270mi) export pipeline out to the Atlantic. Output is already surging, surpassing Colombia as South America’s #4 oil producer.

The hope is it’ll all help Argentina accumulate the foreign reserves it needs to stabilise its economy, repay its loans, and finally escape its debt-and-default cycle.

The third and final driver behind Georgieva’s visit relates to timing: wouldn’t you know it, but Buenos Aires is actually due to start repaying its principal IMF debt next month with an initial $800M, ahead of another $7B due across next year.

Seems doable, right? But the IMF isn’t Argentina’s only lender — throw in the private bondholders, other multilaterals like the World Bank, and a few bilateral lenders like China, and the total amount owing next year comes to a cool $23B.

Then throw in the fact this is all while Milei is up for re-election in October 2027, and you’ll feel a familiar pressure: translate those macro wins into voter benefits, or risk both his second term and repayment plan sliding back into the danger zone.

So that’s why Georgieva just showed up with a smile and a baseball bat: Argentina’s recovery is real, but the hardest test — political and fiscal — is somehow still ahead.

Sound even smarter:

• Argentina famously used foreign reserves to repay an earlier ~$10B in 2006, and free itself from IMF oversight. But expansionist money-printing and a subsequent market panic then obliterated its dollar reserves, bringing Argentina back for history’s largest IMF loan just 12 years later.

• The IMF also wants Argentina back in global credit markets so investors can take the baton, but Milei’s economy minister (Caputo) prefers to hold out for cheaper borrowing costs rather than rush back to Wall Street at a premium.