Argentina repays US financial lifeline as Milei emerges from market crisis

Argentina has repaid the money borrowed under its $20bn currency swap with the US Treasury, as President Javier Milei emerges from a market crisis that threatened to destabilise his government last year.

US Treasury secretary Scott Bessent said on X that Argentina had “quickly and fully repaid” a $2.5bn tranche of the swap facility it had drawn on in October, meaning the Exchange Stabilization Fund that the Treasury used to conduct the swap “currently does not hold any pesos”.

He added that the transactions had netted “tens of millions in profit for Americans”.

The US Treasury approved a $20bn swap line for Argentina’s cash-strapped central bank in October, and also directly intervened in the country’s exchange market to boost the peso.

Bessent said the repayment showed “our ESF actions worked precisely as Congress intended” to resolve a liquidity crisis in Argentina. “A strong and stable Argentina that helps anchor a prosperous Western Hemisphere is in our clear best interest,” he added.

Milei, Donald Trump’s strongest ideological ally in Latin America, was hit by severe market turmoil ahead of last October’s midterm elections. Investor fears that Milei would suffer a defeat at the polls and run out of dollars to maintain his exchange rate policy triggered a run on the peso.

The financial lifeline for Argentina prompted fierce backlash among Trump’s domestic opponents and some Republicans, with critics arguing it contradicted the president’s “America First” agenda.

The US support allowed Milei to avoid a damaging unplanned devaluation of the peso just before the elections. Milei then scored an unexpectedly large victory at the polls, beating the leftwing Peronist opposition by a 9 percentage point margin and more than doubling his bloc in congress.

The peso is now about 2 per cent stronger than it was just before the midterms, while Argentina’s sovereign bonds have soared on growing investor expectations that Milei will be able to expand his free market reform drive. 

Argentina’s interest premium over comparable US Treasuries, a market gauge of the riskiness of Argentine debt, has halved since the midterms, to 5.65 per cent. 

However, the Argentine central bank’s hard currency reserves remain negligible, with almost all of its roughly $44bn made up by loans and other liabilities. 

On Wednesday the central bank sealed a $3bn repurchase agreement with international banks before making a $4.2bn payment to international bondholders on Friday. 

Economists have warned that Argentina must rebuild its reserves, which it needs to repay debts, pay for imports and prop up the peso, to resolve the investor concerns of dollar shortages that underpinned the October market crisis. Last month the central bank announced a plan to buy some $10bn in reserves in 2026.

Central bank data shows Argentina increased its debt with “international organisations” by roughly the same amount as the figure repaid to the US Treasury in the week before the repayment in December. Argentina has not identified the new lender.

The US intervention “fulfilled its objective” by stabilising the exchange rate before the elections, said Gabriel Caamaño, an economist at Outlier, a financial consultancy in Buenos Aires. “In that sense it was successful.”

But he added: “We still don’t know where the central bank got the dollars to pay them back, or if the terms and conditions of that debt are better or worse than the swap [for Argentina].”