Gros News | Argentina Ends Capital Controls After $20B IMF Deal in High-Risk Bid for Economic Reform

Argentina’s libertarian government, led by President Javier Milei, has launched a radical overhaul of the country’s economic model by dismantling long-standing capital and currency controls. Enabled by a $20 billion IMF loan, this move aims to stabilize Argentina’s crisis-prone economy through liberalization, monetary orthodoxy, and fiscal discipline.

In April 2025, the plan took formal shape. Long burdened by inflation, deficits, and regulation, Argentina secured its 23rd IMF agreement under the Extended Fund Facility. The deal forms part of a broader stabilization effort backed by $22 billion from the World Bank and Inter-American Development Bank. This multilateral support aims to restore investor confidence, halt reserve depletion, and stabilize macroeconomic conditions.

The IMF deal affirms Milei’s ideological commitment to liberal economics. Prior regimes’ exchange controls and capital restrictions made Argentina unappealing to investors. Lifting these constraints, Milei hopes to reintroduce Argentina into global markets. Central to this is abandoning the peso-dollar peg. The peso will float within a managed band—initially 1,000 to 1,400 per U.S. dollar, with monthly 1% band expansions—designed to enhance flexibility, curb distortions, and dismantle the black market that thrived under prior restrictions.

Effective April 14, the crawling band system was implemented to smooth the peso’s transition to market pricing and reduce speculative pressure. Milei framed the reforms as a correction of internal mismanagement and a shield against global shocks. Argentina, he claims, is now more resilient due to improved reserves, tighter fiscal control, and expected capital inflows.

A key component of the reform is enforcing a zero fiscal deficit—achieved for the first time in nearly two decades. This move ends inflationary deficit monetization and ensures sustainable public spending. Paired with this are financial liberalization steps: lifting foreign exchange restrictions and allowing firms to repatriate profits in 2025. These measures aim to attract investment and reintegrate Argentina into global finance.

Starting Monday, the central bank will cease artificially managing the peso’s value, letting it adjust to market forces. Firms can now freely repatriate profits—removing a longstanding barrier for multinationals. This liberalization is expected to unlock capital, drive industrial growth, and ease balance-of-payments pressure. It also marks a sharp ideological break from populist nationalism toward libertarian reform.

Yet significant risks remain. Economists warn that loosening controls could trigger capital flight, especially if reserves can’t defend the peso during speculative attacks. A 20–25% depreciation is expected early on. Meanwhile, austerity—especially cuts to the public sector—could provoke unrest and deepen inequality. Though macroeconomic stability may improve, managing the social cost is essential.

There’s also concern that pent-up demand for dollars, built up under years of controls, could overwhelm central bank capacity. If unchecked, rapid depreciation could reignite inflation, threatening Milei’s key achievement: reducing inflation over the past 15 months. This would undermine confidence and the reform’s credibility.

Despite these dangers, the international response has been broadly supportive. IMF Managing Director Kristalina Georgieva praised Argentina’s swift action. The combined support of the IMF, World Bank, and IDB represents rare multilateral alignment in a high-risk emerging economy. These institutions view Argentina’s shift to discipline and openness as a break from decades of economic volatility.

The credibility of the reforms depends on the government’s ability to uphold monetary discipline, maintain reserve buffers, and manage market expectations. If successful, this could usher in a new era of growth, investment, and stability. If mishandled, Argentina risks falling into another cycle of inflation and recession.

With public trust fragile and economic institutions still recovering, the reforms represent a high-stakes test of libertarian governance in a historically interventionist economy. For global markets, Milei’s agenda is not just a stabilization effort—it is a philosophical gamble on systemic liberalization as a path out of perpetual crisis. The months ahead will reveal whether this gamble brings renewal—or relapse.