By Natalia Kidd
Buenos Aires, April 12 (EFE) – Argentine President Javier Milei’s decision to lift the exchange rate cap after securing millions in International Monetary Fund and other loans is a “bold” move in a complex global context, which could lead to sudden devaluation of the Argentine peso and inflation.
However, as announced on Friday, Argentines will be freed from most restrictions on access to foreign currency starting next week.
A new floating exchange rate will begin to operate without intervention from the central bank as long as the price remains below 1,400 pesos per dollar.
“The measures are very disruptive and surprising. It was a bold plan, but the government had no choice. The time was now, especially given the international from the IMF and other organizations, which will almost double the Central Bank reserves,” Leonardo Piazza, director of the economic consulting firm LP Consulting told EFE.
Financial relief
Expectations of a devaluation had risen recently along with the demand for foreign currency, as many investors and experts considered the official exchange rate outdated and the central bank’s foreign reserves were low.
The central bank has lost nearly 4.9 billion dollars in gross reserves in 2025, closing at 24.7 billion dollars on Friday. Although private consultants estimate net reserves may be around negative 9.5 billion dollars.
On Friday alone, the Central Bank lost 398 million dollars trying to contain exchange rate pressures.
Friday’s agreement with the IMF will be key to bolstering said reserves.
In addition to the 20 billion dollars in IMF loans, Argentina will receive additional loans from the World Bank Group (12 billion dollars) and the Inter-American Development Bank (10 billion dollars).
Inflation risk
With increased reserves, the government is betting on introducing a floating exchange rate regime that will fluctuate without intervention from the Central Bank.
Given that the dollar for sale to the public at the state-owned Banco Nación closed at 1,097.50 pesos per unit on Friday, a correction in the official exchange rate and a subsequent transfer to the price of goods and services is expected on Monday.
This would entail higher inflation, which in March rose to 3.7% per month.
“It remains to be seen how inflation will settle down in the second quarter. A shock is very likely, given that there is a budget surplus. The government should increase social assistance to the most vulnerable sectors in the face of food inflation,” said Piazza.
According to the expert, in the long term, the plan is “very good” and could be “successful” in normalizing the economy and attracting investment.
However, for economist Pablo Tigani, executive director of the Fundación Esperanza, the new scheme is “crazy” because it gives “all the freedom” to flee currencies and import “nonsense from anywhere” and “obviously” there will be a devaluation jump that “will be transferred to the prices” of the real economy.
“I think it will be very short-lived,” Tigani told EFE.
The expert was also concerned about the additional debt, given that Argentina’s gross external debt was 276 billion dollars at the end of 2024, of which about 41 billion corresponded to loans with the IMF, which will increase significantly in the short term. EFE
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