Argentina is pursuing a $20bn deal with the International Monetary Fund, Economy Minister Luis Caputo has confirmed, officially quantifying the long-rumoured program for the first time as he attempts to stabilise nervous local markets.

“What we are looking for with this agreement is that people can rest assured that the pesos that exist are backed by the central bank,” Caputo said on March 27, as quoted by Reuters. “That will make us have a healthier currency, with less inflation, with less poverty.”

Beyond the IMF request, Caputo revealed that Argentina is negotiating additional financial packages with multilateral organisations, including the World Bank and the Inter-American Development Bank (IDB), to bolster the country's reserves.

The proposal now awaits approval from the IMF's executive board. Caputo stated that the IMF loan would be earmarked for recapitalising Argentina's central bank rather than covering expenses.

Argentina's financial markets responded positively to the announcement, with the country's risk index dropping 14 points to 755 basis points, while the Buenos Aires stock exchange saw its benchmark S&P Merval index rise by 0.5%, and sovereign debt improved by an average of 0.3%, according to AméricaEconomía.

The government's push for fresh IMF funding comes amid mounting pressures on Argentina's currency and rising investor uncertainty. The central bank has been forced to sell $1.36bn in foreign reserves over the past eight trading sessions alone, as fears of a potential devaluation have intensified with the anticipated end of foreign exchange restrictions and ongoing political tensions.

Argentina's administration maintains a 1% monthly devaluation pace for the peso's official exchange rate, the Buenos Aires Herald reported. Analysts indicate that adopting the more flexible exchange rate regime recommended by the IMF would likely trigger a devaluation that could accelerate consumer price inflation.

Inflation, meanwhile, climbed 2.4% in February. But in an encouraging sign for Milei, who took office in December 2023, it declined 66.9% on a year-over-year basis, according to official data.

Argentina's monthly inflation rate has stabilised around 2%, marking five consecutive months above this threshold, with a modest uptick since January to levels last seen in November. The current inflation rate, the lowest since 2020, stands in sharp contrast to the 20.6% figure recorded a year ago, highlighting the significant progress in the country's battle against runaway prices despite persistent economic challenges.

Argentina owes the fund approximately $44bn, with interest payments of $3.5bn due this year. The country faces total repayments of around $12.7bn in principal and interest during President Milei's term. Principal repayments to the IMF are scheduled to begin next year.

This new IMF programme would represent another chapter in Argentina's long and complicated relationship with the Washington-based lender, as the country has been a serial defaulter in recent decades, severely limiting its ability to borrow from international markets. The success of this financial strategy will be crucial for Milei's bold economic stabilisation plans, which aim to tame inflation and restore Argentina's credibility with global investors.