Another IMF loan for Argentina could have major repercussions

What the Milei government has obtained may turn out scandalous for the Fund and bad for others

- Martín Guzmán

The International Monetary Fund (IMF) has approved yet another loan to Argentina, worth $20 billion, with the nod of its executive board. But in disbursing the loan under current conditions, the IMF would violate its own lending rules, and doing so would pose risks to multilateralism and hurt Argentinians.

Argentina is the IMF's largest debtor, accounting for about 37% of its total outstanding credits: 31.1 billion special drawing rights out of 84.2 billion and 28% of the total approved credit of $110 billion. In 2018, the IMF approved a $57 billion loan to Argentina, its largest ever to a single country, nearly $45 billion of which was disbursed. But the financing stopped after President Mauricio Macri lost his re-election bid in 2019, and the loan is now widely seen to have been politically motivated.

The disbursed funds financed a capital flight of around $24 billion by carry-trade speculators. The rest was used to amortize roughly $21 billion in unsustainable sovereign bonds, debt that had to be restructured in 2020, by when I was Argentina's economy minister. The IMF admitted this failure in 2021 in an evaluation of its 2018 'stand-by arrangement' with Argentina. It concluded that there should have been capital-account regulations to prevent capital flight, as well as debt restructuring to avoid IMF resources being used to repay unsustainable public debt with the private sector.