The leader of the International Monetary Fund provided a renewed endorsement for Argentina on Friday, aligning with the Trump administration’s initiatives to bolster President Javier Milei ahead of the country’s midterm elections scheduled for later this month. IMF Managing Director Kristalina Georgieva indicated that she had discussions with US Treasury Secretary Scott Bessent regarding “extensive US plans for financial assistance, including the use of US holdings of” Special Drawing Rights for Argentina. SDRs, as they are referred to, constitute the reserve asset of the Washington-based fund, derived from a composite of currencies.
Georgieva’s remarks represent the most recent development in a tumultuous month for Argentine markets, characterized by the erratic fluctuations of bonds amid growing apprehensions regarding the future of Milei’s administration and its economic reform agenda. The President of the United States, Donald Trump, has taken steps to provide financial support to Milei following a significant defeat in a provincial election. He is scheduled to welcome Milei at the White House on October 14. Following Georgieva’s remark in an post, Argentine dollar bonds experienced an upward trajectory across the curve, with notes maturing in 2035 reaching a daily peak, increasing by two cents on the dollar to trade above 55 cents, as per data. The peso concluded trading with a decline exceeding six percent this week, marking the most significant drop among emerging markets. This occurred despite the efforts of Milei’s administration to support the currency, which is generally perceived as overvalued, through the sale of dollars. Neither Georgieva nor Bessent has articulated the mechanism of support for Argentina, nor has a timeline been provided. The US Treasury has yet to provide a response regarding the IMF chief’s social media post.
Argentine Economy Minister Luis Caputo is set to travel to Washington on Friday to advance discussions with Bessent, who has previously suggested the possibility of a US$20-billion currency swap line between the two countries – a proposal that has elicited criticism from certain Republicans on Capitol Hill. The swap would be in addition to the IMF’s own loan to Argentina in April for the same amount, which Bessent referred to as a “fulcrum day” at that time for the South American nation. Argentina’s total indebtedness to the IMF stands at approximately US$55 billion, accrued through various programmes since 2018, as successive bailouts have not succeeded in stabilizing the country’s economy. Should the US decide to lend its SDRs at the IMF to Argentina, Milei might convert them into dollars or potentially reduce some of the principal his administration owes to the Washington-based lender. Efforts to stabilize Milei’s government precede the pivotal midterm elections on October 26, during which nearly half of the seats in Argentina’s Congress will be contested.
Investor expectations that Milei would secure a decisive victory have recently been tempered by a stagnating economic recovery, a corruption scandal, and a resurgent leftist opposition that dealt a significant blow to his party in the recent Buenos Aires Province elections, which many view as indicative of the national vote. What remains ambiguous is Argentina’s obligations in return for the financial support from Trump. Milei has refuted claims that the United States has requested Argentina to eliminate its existing US$18-billion swap line with China. Caputo has maintained that no policy changes will occur following the midterm election, despite analysts suggesting that there may be a necessity to completely remove currency controls and allow the peso to float freely without intervention.