Committee for the Abolition of Illegitimate Debt

With these funds, the government plans to ‘free’ the Argentine peso from controls and allow it to float freely within a moving band. The aim is expand the current band by 1% each month. The government and the IMF IMF
International Monetary Fund Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org claim that this will eventually achieve “fully flexible exchange rate in the context of a bi-monetary system, where the peso and U.S. dollar coexist.” In other words, the financial speculators and investors will believe that the peso was strong enough to be fully convertible to the dollar without having to be devalued.

That has not been possible for decades, because of the huge dollar debts owed by the government and the lack of FX reserves to back the peso. Milei has targeted year-end for undoing FX controls, or sooner if the IMF speed up payouts. “The currency controls will no longer exist on January 1 (2026). Maybe sooner,” he said. As a result of the news, the ‘freed up’ official peso rate fell around 9% to 1,170 per US dollar, while, in contrast, the black market rate strengthened, so almost closing the gap between the official and informal rates that had widened sharply in recent years. Despite this, the peso rate against the dollar remains no better than when Milei came to power at the beginning of 2024.

Despite Milei’s boast, until the IMF came to the rescue, FX reserves had been dropping fast, with net reserves (ie after debt obligations and flows) at a negative $7bn. That’s not far short of the deficit that Milei inherited from the previous Peronist government.

Milei came into office in 2024, with the image of being a ‘free market’ libertarian, ‘anarcho-capitalist’. He was going to close down the central bank Central Bank The establishment which in a given State is in charge of issuing bank notes and controlling the volume of currency and credit. In France, it is the Banque de France which assumes this role under the auspices of the European Central Bank (see ECB) while in the UK it is the Bank of England.

ECB : http://www.bankofengland.co.uk/Pages/home.aspx and ‘dollarise’ the economy and he was going to free up the peso and Argentine industry to market forces. But soon all this anarcho-capitalist talk melted away and instead Milei was forced to adopt the standard neoliberal economic package for an emerging economy in debt distress and with hyperinflation; namely vicious cuts in public spending and services alongside incentives to big business and foreign investors and, of course, the backing of yet another IMF package. Milei wielded a chainsaw to public sector and private sector jobs and in just a few months under Milei, Argentina faced the same job losses seen over four years of the previous right-wing president Macri’s rule.

The IMF under Kristalina Georgieva has been suitably impressed, holding lots of photo opportunities with Milei and writing “the country appears closer to a semblance of macroeconomic stability than at any point since the 2000s.” What the IMF likes is that Milei is committed to a ‘net zero’ government budget. Having ‘chain-sawed’ public services and sacked thousands of government workers, while raising employee social security contributions, the government aims for a surplus in the government budget (before interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. payments) and an overall balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. in 2025. It will go on squeezing government spending and raising taxes to run surpluses in future years – similar to the fiscal austerity programme that the EU ‘Troika Troika Troika: IMF, European Commission and European Central Bank, which together impose austerity measures through the conditions tied to loans to countries in difficulty.

IMF : https://www.ecb.europa.eu/home/html/index.en.html ’ imposed on Greece ten years ago to pay back its loans (it’s still paying), but this time with the enthusiastic support of the incumbent government.

In 2018, the IMF approved a $57 billion loan to the then right-wing government in Argentina – its largest ever to a single country – nearly $45 billion of which was disbursed. Most of this just financed capital flight of around $24 billion by ‘carry-trade’ speculators ie using the funds to buy foreign bonds. The rest was used to amortize roughly $21 billion in unpayable sovereign bonds – debt that eventually had to be ‘restructured’ in 2020.

Now the IMF is loaning yet more money, violating its own lending rules. That’s because unlike in 2018, Argentina now has a law – passed almost unanimously by both houses of Congress in 2021 – requiring congressional approval for any IMF financing program, with the aim of preventing future governments from borrowing massively in foreign currency without proper legislative oversight. But the Milei government has bypassed the law by issuing a Decree of Necessity and Urgency (DNU) – the Argentine equivalent of Trump’s emergency executive orders – to avoid Senate approval altogether.

And the IMF is happy to go along with this. That’s because the IMF wants the Milei government to survive the mid-term Congressional elections by being able to show that inflation Inflation The cumulated rise of prices as a whole (e.g. a rise in the price of petroleum, eventually leading to a rise in salaries, then to the rise of other prices, etc.). Inflation implies a fall in the value of money since, as time goes by, larger sums are required to purchase particular items. This is the reason why corporate-driven policies seek to keep inflation down. has come down, the economy is booming and the peso is stable. As the IMF says in its report, this will be possible given “ongoing spending discipline, efficiency measures, and well-sequenced reforms of the tax, revenue sharing, and pension systems” and “building on the impressive ongoing efforts to deregulate the economy, the program seeks to deepen structural reforms to boost Argentina’s growth, including via its vast potential in energy and mining. Efforts will focus on further (i) strengthening product and labor market flexibility, and gradually opening the economy; (ii) improving state efficiency and its regulatory predictability; and (iii) enhancing governance and transparency, including by further aligning anti-corruption and AML/CFT frameworks with international standards.”

It’s true that inflation has fallen back from astronomical levels. That has been achieved by the slashing of government spending and holding the peso artificially above its real rate to the dollar, thus making imports cheaper. In effect, hyper-inflation was replaced by a major slump.

The inflation rate has fallen from 300% a year to around 50% (still high). But that has meant a rise in real wages in the last half of 2024, taking the average back to the end of 2023. But during the whole of 2024, average real wages still fell 12% and public sector workers took a hit of 20% with 30% for informal workers without rights etc. The rise since mid-2024 is entirely due improved incomes for informal workers in the private sector; public sector waged workers are still down 20%, private sector workers are down 5% – and all workers are still worse off than at the beginning of 2023.

During the Milei-induced slump of 2024, the official poverty rate hit a record 51%. That official rate has now dropped to 38%, due to a combination of the fall in inflation, the relative rise in informal wages and extra benefits in the universal child allowance and food support to cover inflation, aimed mainly at poor children and mothers. Without that, the World Bank World Bank
WB The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

reckons extreme poverty may have been 20 percent higher. Even so, the poverty rate is still as high as when Milei came to power.

Two-thirds of Argentine children under the age of 14 are living in poverty. Multidimensional poverty (measured as income plus lack of access to key welfare factors) increased inter-annually from 39.8 to 41.6 percent and within that figure, structural poverty (three wants or more) rose from 22.4 to 23.9 percent. In sum, 25-40% of Argentine families are in deep poverty. And there has been a further increase in inequality. The top 10% of income earners now earn 23 times more than the poorest decile, compared to 19 times a year ago. The fall in income reached 33.5% year-on-year in real terms among the poorest decile, but only 20.2% among the richest. The gini inequality index has hit an all-time high of 0.47.

But from here, Milei and the IMF are full of optimism. According to the IMF, real GDP GDP
Gross Domestic Product Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another. growth is expected to expand by about 5½ percent this year, and converge to about 3 percent over the medium term. But after the slump of 2024, such a rise in real GDP in 2025 would only take per-capita GDP back to the level of 2021, when the economy was emerging from the pandemic. And indeed, the per capita GDP index would still be well below its peak of 2011, some 15 years later.

Inflation is expected to fall to around 18–23 percent in end-2025 and reach single digits by 2027 as long as there is “a strict adherence to the fiscal anchor, along with a more robust monetary/FX regime with greater exchange rate flexibility to address shocks and strengthen aggregate demand management.” In other words, indefinite austerity.

Martin Guzman, a former economy minister with the Peronist bloc, said that the risk of a new IMF deal was that the funds would simply be used to ‘firefight’ the slide in the peso, eventually leading to greater debt loads. “The positive aspect of a new agreement would be the refinancing of the IMF debt, which begins to mature in September 2026. The negative aspect is more debt.” Contrary to Milei’s boast, Guzman reckoned that it was “highly unlikely” currency controls would be lifted soon because it would allow global firms to flee an estimated $9 billion that had been stuck in the country, pressuring the exchange rate down and inflation up.

The key to economic success in Argentina, as it is in all economies, is an increase in the productivity of labour through more investment in the productive sectors of the economy. All the previous IMF loans ended up being smuggled or invested abroad or used for financial speculation. Neither right-wing nor Peronist governments did anything to stop this speculative robbery of the Argentine people and resources.

There are only two major economic sectors that have flourished under Milei — finance and mining. They provide little in the way of tax revenue and employ relatively few workers (4% of the total). By contrast, the three major sectors that are still deep in recession are construction, industry and commerce, which account for almost half (44.5%) of the job market. Argentina’s biggest export sector and source of foreign exchange is agricultural products and this sector is suffering a wave of debt defaults.

Argentina could possibly get out of its mess if there were a boom in commodity prices, as there was in the early 2000s. Argentina is the world’s largest exporter of soya bean oil and meal, the number two exporter of corn and the third biggest exporter of soya beans. However, for now, soybean and corn prices are not very buoyant. Argentina has the world’s third-largest lithium reserves, making it a key player in the global energy transition. However, lithium prices have dived recently. Argentina also has considerable reserves of shale gas. The Vaca Muerta oil field is one of the world’s largest unconventional hydrocarbon resources, with an estimated 16 billion barrels of oil and 308 trillion cubic feet of natural gas and just coming on tap. But oil prices have fallen. And Trump’s 10% tariff hike on all US imports will just add to Argentina’s export woes.