Is the US currency rescue for Argentina positive statecraft or reckless favoritism?
Last week, US Treasury Secretary Scott Bessent announced that the Trump administration was in talks to open a twenty-billion-dollar support package for Argentina. With this move, the United States has opened a new chapter in the history of international finance. It is not the first time that the United States has used its Exchange Stabilization Fund to support a southern neighbor, but the Mexican swap line during the 1995 peso crisis was a direct response to a major US trade partner facing economic collapse. The Argentinian situation, by contrast, appears driven by a combination of political motives—first, to support an ideologically aligned government at a crucial moment, and second, to prevent a strategically important and resource-rich Latin American economy from relying even more on China for immediate assistance.
For Argentina, the US commitment provides crucial breathing room at a moment of maximum political vulnerability. Earlier this month, Argentinian President Javier Milei’s party suffered a major defeat in a provincial election ahead of the midterm polls in late October that will be critical for the government’s reform drive. The government’s chances of winning additional seats in congress looked slim as the peso slid against the dollar, despite heavy intervention by Argentina’s central bank. But this slide reversed sharply after the US announcement, providing the government a political lifeline that could prove critical in the upcoming election.
The details of the support package remain to be determined. For example, it’s not yet clear whether it would come in the form of a loan, a swap line (that is, a temporary exchange of US dollars for Argentinean pesos) or outright bond purchases by the US Treasury. All these options would offer Argentina several tangible benefits. First, they would provide dollar liquidity to defend the peso without further depleting the central bank’s reserves, which are a key performance indicator for the current International Monetary Fund (IMF) program. Second, they would signal to markets that Argentina has a powerful ally willing to counter speculative attacks, reducing borrowing costs and helping maintain market access. Third, the US backing could give Milei political room to implement painful but necessary reforms without risking a run on the peso.
With US support at its back, Argentina needs to continue delivering on the policy side.
In fact, there is a reasonable case for the United States to come to Argentina’s aid, independent of their leaders’ mutual political interests. Argentina has made important but painful strides in reforming its economy and addressing its budget deficit, but reforms are incomplete and the country lacks investment to return to a sustainable growth path. After two failed IMF programs under previous governments, the current attempt offers the best chance yet to get Argentina out of its doldrums. To the extent that it can help this process along, the United States should not leave the field to China, which would be able to exploit the vacuum left by an imploding Milei government and a return to Peronism two years from now.
But this support should come with important caveats. With US support at its back, Argentina needs to continue delivering on the policy side. To help this along, a close collaboration between the US Treasury and the IMF will be essential, not only in terms of their asks for the government (the United States has yet to announce whether it will impose any conditions) but also in ensuring their implementation. As an international institution, the IMF has the legitimacy and technical expertise to design an appropriate program, but it often lacks the political heft to insist on the country meeting its targets, a role that the US Treasury can share in this case.
Given Argentina’s long and painful economic history, there is much at stake for all involved. Argentina’s citizens have borne the brunt of their leaders’ past mismanagement, and a speedy return to higher growth at low inflation would help alleviate the hardship of recent years. And the United States will bring twenty billion dollars from the Exchange Stabilization Fund to the table while also staking its financial leadership on a successful outcome—both vis-à-vis the markets, which at some point will test US resolve to help Argentina, and China, which provided an earlier swap line but remained passive with respect to economic policies.
For the IMF, the participation of the United States arguably carries the largest risk. Although the fund is still Argentina’s largest creditor, with a peak exposure of $58 billion in 2026, it may find itself pushed to the sidelines on important program decisions. In part, this is because the United States, as the IMF’s biggest shareholder, has always exerted considerable influence on its management. More importantly, however, the IMF will have disbursed most of its loan by the end of 2025, leaving the United States in a strong position to set the terms for the remaining program years. Much will rest on the role played by Dan Katz, the US nominee to be the next IMF first deputy managing director.
As mentioned above, it would be best if the United States and the IMF were to closely coordinate their actions. But a greater challenge would come from a disorderly end to Argentina’s reform effort, which carries an uncomfortably high probability given domestic polarization, a tendency to stick to an overvalued exchange rate, and jittery financial markets that need little prodding to sell Argentinian assets.
In the worst case, Argentina would have received sizable funds from the ESF while the IMF would retain a large exposure. How would the Trump administration approach a situation in which another large debt restructuring might be necessary? Would the United States then question the IMF’s preferred creditor status—which rests on an informal agreement between members of the Paris Club of major lenders—and insist on being paid back first? If so, then this would not only put the IMF in a difficult spot, but it could also be a blow to the broader sovereign debt architecture, as it may imply a higher burden for other official and private creditors.
To sum up, the proposed US support for Argentina marks an important departure from past lending practices. Whatever the White House’s motivation, the loan will be a test for the relationship between the IMF and its biggest shareholder. In the best case, it might help Argentina to finally move to a higher growth path. But on the opposite end of the spectrum, it could undermine the global financial architecture, which is built around the IMF as a lender of last resort acting in the global interest.
Martin Mühleisen is a nonresident senior fellow at the Atlantic Council’s GeoEconomics Center and a former IMF official with decades of experience in economic crisis management and financial diplomacy.
Further reading
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The International Monetary Fund recently completed the first review of Argentina’s Extended Fund Facility signed in April. The result was positive, reflecting the country’s larger economic trajectory under President Javier Milei.
Wed, Apr 16, 2025
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Image: US President Donald Trump shakes hands with Argentina's President Javier Milei as they meet during the 80th United Nations General Assembly, in New York City, New York, U.S., September 23, 2025. REUTERS/Al Drago
