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Javier Milei, once a global poster child of fiscal shock therapy, has lost much of his initial appeal when his economic programme started to crumble after losing a local election in Buenos Aires Province in early September. Since then, Argentina has been walking a financial tightrope as initial optimism in austerity measures is fading, giving way to investors’ concerns over foreign reserves, stubbornly high sovereign spreads and a deeply fractured political environment. This confidence crisis unfolded despite the International Monetary Fund (IMF) approving another US$20 billion loan in April 2025 to ensure a stable economy ahead of the October midterm national election. Yet, stability was momentarily guaranteed only after the U.S. Treasury announced its intervention on September 22 under conditions largely unknown to the public.
Would it be unfair to say that the IMF has scored another defeat with Argentina? Recurrent Argentine crises under the IMF watch have continued to cast shadows over the Fund’s reputation. If the IMF’s mission is partly “discouraging policies that would harm prosperity”, then the track record of one of its most frequent clients raises uncomfortable questions. Is the latest turmoil the result of misguided policy design, flawed implementation, or is there a deeper problem in how the IMF engages with Argentina?
Argentina and the IMF: A long-troubled relationship
Argentina’s latest chapter with the IMF starts well before the 2025 programme. It dates back to 2018, when the Fund approved a US$50 billion loan, later increased to US$57 billion, of which more than US$40 billion was eventually disbursed. Since then, Argentina has remained the largest single-country debtor in the IMF’s portfolio, with an outstanding credit of nearly US$41 billion following its latest Extended Fund Facility (EFF) programme in April 2025. The country is also an outlier in terms of the number of programmes. Since its first rescue in 1956, Argentina negotiated 22 other loan arrangements, from small stand-by agreements to the IMF’s biggest loan package in history, approved in 2018 under Mauricio Macri’s presidency.
Macri’s agreement was cancelled –though the debt remained– by request of the newly elected Peronist administration in July 2020. By then, the programme was largely off track, carrying the effects of the pandemic shock. To refinance obligations, the Peronist Minister of Economy, Martín Guzmán, secured another EFF in 2022 for the outstanding amount (US$44 billion), spreading repayments over 2026–2036. But this programme also derailed when a severe drought affected reserves accumulation, and the war in Ukraine pushed up global commodity prices –most importantly for the Argentinian case, energy–, fuelling inflation and deteriorating the balance of payments. Political backing was also weak: the ruling coalition never fully owned the programme, and key performance targets were missed under what the IMF qualified as a ‘rather shallow and gradual adjustment effort when compared to the scale of the underlying imbalances’.
An IMFamous comeback: How Milei ended up in the Fund
When Javier Milei was elected President, he campaigned to shut down Argentina’s central bank (BCRA) and kill inflation by dollarizing the Argentinian economy. Neither happened. Yet, against all odds, monthly headline inflation fell faster than expected, currently oscillating below 2%, compared to an astonishing 25.5% that Milei inherited in December 2023. With that, the President secured his place as a global influencer of the minimum state with strong domestic support, earning praise from the IMF for bringing the Guzmán-era programme back on track.
At the core of his plan was a strong fiscal bedrock. The government slashed spending to eliminate monetary financing of the deficit, restoring both fiscal and current account surpluses after 14 years. But outside of the fiscal anchor –and despite Milei’s libertarian rhetoric and constant invocations of Austrian economics– the programme looked anything but orthodox.
After a sharp initial devaluation of over 50% to rapidly correct resource allocation in the tradeable sector, the exchange rate was managed under a “crawling peg” scheme. The peso was held artificially strong against the dollar, while keeping some capital controls – a policy mix whose drawbacks have been well-documented by previous Argentine central bankers and academics. This scheme anchored inflation but also undercut competitiveness, straining the very external accounts Milei needed to stabilise.
By early 2025, ahead of the midterms, it wasn’t clear whether the government could maintain a stable peso with its limited policy toolkit amidst a challenging international context. Donald Trump’s Liberation Day announcement spiked emerging markets’ sovereign spreads, especially for Argentina, shutting down market access for credit rollovers. Milei was left with little option but to turn to the IMF.
Source: own elaboration with Emerging Markets Bond Index (EMBDI) data
The April EFF agreement introduced renewed conditionalities: the exchange rate scheme shifted from a crawl to a currency corridor of 1,000/1,400 pesos per dollar –widening by 1 per cent a month – inside of which the BCRA would not intervene, capital controls would be gradually eased, and the Treasury would meet reserve‑accumulation targets. Markets initially cheered with the deal, and the currency stabilised, but the government refused to purchase reserves to keep the exchange rate closer to the lower band of the corridor to contain inflation further. Prominent voices in the economic field warned against this risky strategy of creating a de facto peg against the dollar inside the band.
Their fears proved correct. The IMF had to waive the missed reserve-accumulation target in its first programme review, underscoring the fragility of Argentina’s stabilisation gamble. Political pressures soon mounted amidst corruption scandals. Congress started passing social protection bills that threatened the fiscal anchor, while the government improvised monetary policy changes, including raising banks’ reserve requirements, making interest raise increase and choking economic activity. As a result, Milei’s party suffered a brutal electoral defeat in Buenos Aires Province, which sent markets tumbling. A deeper crisis was barely averted only after the Secretary of the US Treasury, Scot Bessent, announced a financial lifeline.
Bad policy or flawed implementation?
In retrospect, the 2025 Extended Fund Facility looked defensible on paper: gradual capital-account opening, preserving fiscal anchors, and clear reserve-build-up targets. However, a plan only works if the borrower owns it and the lender can enforce discipline. Argentina under-delivered, but the IMF didn’t crack the whip.
Could the Fund have altered the crisis course by exerting stronger pressure to build reserves and liberalise capital flows faster? Perhaps yes, but this counterfactual misses the underlying issue. The relationship itself has become a trap: Argentina is ‘too big to fail’ and the IMF is too exposed to walk away. That dynamic erodes conditionality and leaves both sides hoping for a commodity windfall — shale gas, lithium, mining exports — and friendly signals from Washington, largely dependent on electoral outcomes.
Until the IMF finds a way to enforce its agreements, or Argentina finally commits to not sacrificing them for short-term electoral gambles, the cycle will likely repeat: crisis, bailout, partial reform, relapse. And every time it does, the question will resurge a little louder: if the Fund cannot help its most chronic patient stabilise, what does that say about its credibility to address crises in the global financial system it was built to uphold?