The International Monetary Fund (IMF) endorsed Javier Milei’s economic course but also pushed back on the fiscal surplus the government has been celebrating, calling for a tax reform and a faster pace of reserve accumulation ahead of next year’s presidential elections.
The IMF’s Executive Board wrapped up the second review of Argentina’s 48-month Extended Fund Facility (EFF) arrangement late last week. The approval cleared an immediate disbursement of roughly US$1 billion.
In its Staff Report and Selected Issues documents, released on Friday, the fund highlighted the “reform momentum” built up by the passage of key legislation on fiscal, labor and trade matters.
The IMF said program implementation “remained strong” and that the policies applied were “prudent.” Even so, it acknowledged that the government had missed its net international reserves target for last December by “a significant margin.”
The government missed the target by US$10 billion, largely because of “the increase in dollarization ahead of the midterm elections.”
The document also clarified that the surplus the Milei government touts doesn’t include capitalized interest. “Including the real component of capitalized interest above the line would push the total fiscal deficit to around 0.8% of GDP,” the IMF said.
Election risk and the reserves gap
The fund said that “recent tweaks to the monetary and exchange-rate regime, together with steady foreign-currency purchases, will leave the economy better prepared for the 2027 elections.”
It stressed, however, that “the low level of liquid reserves continues to pose risks to repayment capacity, especially against large debt maturities and the potential volatility ahead of the 2027 presidential elections.”
For that reason, the fund underscored the importance of “decisively rebuilding reserves and aiming to overperform the targets in light of the uncertainties tied to the upcoming presidential elections.”
“Political uncertainties ahead of the 2027 presidential elections could trigger capital outflows and slow or reverse the reform momentum, especially if progress on boosting jobs and real incomes stalls,” the fund added.
On reserves, the fund called for “a competitive exchange rate” and argued that while Argentina’s energy and mining sectors have significant export potential, the government will need to carefully calibrate its policies to mitigate the risks of Dutch disease.
In Economics, Dutch disease is the phenomenon by which a surge in foreign-currency inflows from exports drives up the local currency and undercuts the competitiveness of other sectors, such as industry.
The tax reform the IMF wants
The documents also push hard for a sweeping tax reform. “Argentina’s tax system remains complex, highly distortive and unstable, which weighs on growth and competitiveness,” the IMF said.
The fund’s staff noted that general government tax revenues “are high by regional standards,” at around 27% of GDP in 2025.
That reflects “a system marked by high statutory tax rates, a narrow tax base because of multiple special regimes and an excessive number of taxes — more than 155 — subject to frequent changes,” they said.
The fund argued for broadening the personal income tax to make sure at least 20% of formal-sector workers pay it, in line with 2019 levels.
It also urged a reform of the Monotributo, the simplified tax regime for small taxpayers, to raise social security contributions. Separately, it called for simplifying the corporate income tax through a flat corporate rate and eliminating tax breaks and subsidies.
The IMF also urged coordination with the provinces to replace the gross income tax with a dual provincial-federal VAT over a 10-year horizon.
Argentina’s debt with the IMF
Argentina’s latest agreement with the IMF, approved on April 11, 2025, provides total access of US$21 billion, equivalent to 479% of Argentina’s IMF quota.
According to fund data, Argentina’s debt to the institution stands at US$57.25 billion, making Argentina the fund’s biggest debtor. Ukraine ranks second, at roughly US$15 bn.
