Argentina's government is advancing its efforts to secure a new International Monetary Fund (IMF) programme with the formalisation of a decree of necessity and urgency (DNU) published in the official gazette.

This development could provide Argentina with crucial financial support to meet its debt obligations and eventually lift capital controls, according to Reuters.

Under President Javier Milei's leadership, Argentina has implemented severe austerity measures that have helped reduce fiscal deficits and begin taming the country's triple-digit inflation. However, the administration requires additional financial resources to sustain these reforms, particularly with central bank reserves in negative territory and significant debt repayments on the horizon.

"To ensure economic stability, it is imperative to urgently reduce a significant portion of the National State's debt to the central bank (BCRA), thereby improving its financial position and international reserves liquidity," read the decree published on March 11.

The planned extended fund facility (EFF) would feature a 10-year repayment period with a 4.5-year grace period. The decree indicates that the new funds would be allocated to settle Treasury debt with the central bank, though it doesn't specify the programme's size. Financial institutions, including UBS Group AG, Morgan Stanley and Bank of America Corp., have estimated the potential loan could range from $5bn to $20bn.

AFP reported that Milei asked lawmakers to approve the IMF loan agreement. The decree, a key component of the libertarian president's strategy to navigate the IMF deal through Congress, signals that an agreement may be imminent.

Argentina's IMF debt, standing at approximately $44.5bn, stems from a Stand-By Arrangement agreed in 2018 during a period of significant capital outflows and peso depreciation. The country and the lender reached an Extended Fund Facility (EFF) deal in 2022, which concluded in September last year.

Milei has recently claimed that the new IMF agreement under negotiation will stabilise the country's central bank and ultimately eliminate inflation. 
In an op-ed published in La Nacion, he explained that the forthcoming deal would enable the government to clear its debts to the BCRA, addressing what he identified as a root cause of the country's persistent inflation. “The money received from the IMF will be used by the treasury to cancel part of its debt with the central bank,” Milei wrote.

The new potential agreement comes at a critical juncture for Argentina, with mid-term legislative elections looming later this year. The success of Milei's economic programme and his political future may hinge on securing IMF support, as he faces the dual challenge of maintaining Argentina’s economic recovery and garnering electoral support for his party.