March 23, 2025 (EIRNS)—On March 19, in a very tense environment, Argentina’s Chamber of Deputies voted up an “urgency and necessity” decree (DNU) by a vote of 129-108 with six abstentions, to allow the government of Javier Milei to begin negotiations with the International Monetary Fund for a new Extended Fund Facility (EFF) agreement. By resorting to a decree, the government bypassed the federal law which states that Congress must approve the contracting of any new debt and the terms and conditionalities that would be attached to it, allowing Milei to instead negotiate without the legislature reviewing the terms.
Against the backdrop of a currency crisis, dangerously low foreign reserves and mid-term legislative elections in October in which Milei’s LLA party must make a good showing, the government is desperate for new funds to try to avoid further financial instability. Despite low dollar reserves, for the past months Finance Minister Luis Caputo has been pumping hundreds of millions of those scarce dollars every week into the foreign exchange and currency markets to prevent the peso-dollar exchange rate from going off the rails and affecting the inflation rate. At the same time, Caputo has forced local banks to raise interest rates on private dollar accounts to stem the flow of dollars out of them.
Bloomberg reported March 12 that an informal meeting will be held with the Fund this coming week to discuss a four-year EFF to include a 10-year repayment period and a four-year, six-month grace period. The figure of $20 billion has been mentioned but the Fund is releasing few details. Milei and Caputo have insisted that a new agreement will not include a currency devaluation but it appears inevitable that this will occur. Milei is terrified that should a devaluation occur before October, with all its negative effects, it could cause his party to lose the election. According to various press accounts, he is now proposing to move the elections up to July in hopes that a devaluation would take place after that.
