Argentina

Inheriting an economy on the verge of a balance of payment crisis, the Milei administration implemented a stabilization plan centered on a strong fiscal anchor, an initial large step devaluation (followed by a crawling peg), and an ambitious deregulation agenda. This has yielded a rapid disinflation, the first primary surplus in almost two decades, an initial turnaround in reserves, and a strengthened balance sheet of the central bank, all of which contributed to sharply lower sovereign spreads. Despite the adjustment, the economy and real wages have been recovering since mid-2024, supporting rapid improvements in social indicators. Nevertheless, Argentina’s vulnerabilities and challenges are substantial, as external buffers remain very weak, inflation is still elevated, and many structural impediments to investment and employment persist. Recognizing remaining challenges and sharply rising global risks, the authorities are requesting medium-term balance of payments assistance under a new Extended Fund Facility (EFF) arrangement to address Argentina’s weak balance of payments position, maintain external and internal stability and create conditions for stronger and more sustainable growth.