Argentina and the IMF: a troubled history

Since joining in 1956, Argentina has become the IMF’s biggest debtor. On Friday, it secured a new $20B deal—its 23rd program. The first dates back to 1958 with a $75M loan. In total, Argentina has received $177B from the IMF to fight inflation and repeated economic crises.

The latest program may help Argentina pull itself out of one of its worst economic crises: triple-digit inflation, foreign currency reserves in the red, tight currency controls to protect the peso, and the tail-end of a recession.

But the two sides have a complex and mottled history, increasingly entwined after a $57-billion deal in 2018 and a $44-billion program in 2022 to help roll over payments from the previous program that failed to halt an economic slide.

Many in Argentina blame the IMF for exacerbating a historic crisis in 2001 and 2002 by pushing tough austerity on a country already suffering, and protests in Buenos Aires often feature placards criticizing the lender.

"All past experiences with the IMF in our country have been terrible," leftist lawmaker Myriam Bregman told Reuters during a recent street protest led by pensioners reeling from spending cuts by the libertarian government of President Javier Milei.

"Many Argentines will not be able to retire," Bregman added.

Governments across the political spectrum have been forced to go to the IMF over the years to seek help in battling regular fiscal deficits, stubbornly high inflation and inefficient economic production pushing Argentina into cyclical crises.

The lender has recognized its own shortcomings in dealings with Argentina, saying its policies failed to achieve the proposed objectives.

Milei, and investors, hope this time will be different. The president, a former economist and political outsider, has already made huge cuts to spending.

That contributed to a rare fiscal surplus last year, even before any demands from the IMF, which usually insists that loan programs be linked to economic reforms and targets.

Milei's measures have helped stabilize the economy, cut inflation and restore some confidence in markets, and he says they are tougher than what the IMF would seek.

Economic growth, employment and the poverty rate, which took a massive hit after he took office in late 2023, have also started to improve.

BOOM-AND-BUST

A major exporter of soy, corn and beef, Argentina was one of the world's wealthiest countries per capita a century ago, but fell prey to a boom-and-bust cycle that has seen it regularly return to global lenders, including the IMF and the Paris Club, plus swap lines with the People's Bank of China.

It has also had a complex relationship with private lenders. It carried out a major bond restructuring in 2020 to avoid a messy default, in the shadow of non-payments hanging over it from an economic crisis in the early 2000s.

Argentina took multiple loans from the IMF each decade from the 1950s to the 2000s.

There was then a 15-year hiatus until a record $57-billion bailout in 2018 under conservative President Mauricio Macri that ultimately failed to put South America's second-largest economy back on its feet.

That failed program was replaced in 2022, agreed by the then left-leaning Peronist government, to restructure some $44 billion owed from the previous program.

On the streets of Buenos Aires, residents had mixed feelings towards the new program.

"When someone says yes to a loan, it's positive because it means they trust you," said 56-year-old Pablo Inzua. But he warned the country had been burned before by taking on too much debt.

Maria Del Valle Romano, a 68-year-old retiree, said she was entirely against it. 

"I don't like it," she said. "When Macri was in government, he already went into debt for I don't know how many billions, now this one for another bunch of billions. How much more debt is this president going to get us into?"

Washington-based analyst Nicolás Saldías at the Economist Intelligence Unit said, unlike previous presidents, Milei's commitment to market reforms and fiscal balance meant that this time Argentina could implement and stick to the terms.

"Milei is more IMF than the IMF - he doesn't come empty-handed and has more than satisfied many of the Fund's conditions," he said.

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