The International Monetary Fund (IMF) has an indefensible history in Argentina going back to the 1990s, when its policies prolonged the country’s worst depression, which lasted from 1998 to 2002. But now history is repeating itself with a vengeance.
The most recent installment is a $20 billion loan agreement approved on April 11. But Bloomberg reported that about half of the IMF board’s 25 executive directors had “serious concerns” about the loan, including whether it would be paid back. Moody’s rates Argentina’s sovereign bonds at Caa3, indicating a very high credit risk. This is a dark sequel to the IMF’s all-time record largest loan, also given to Argentina, which was a package of $57 billion announced in 2018.
The 2018 loan, like the present one, was widely seen as political, intended to boost former Argentine President Mauricio Macri’s right-wing government, which was favored in Washington at the time. However, it ended very badly—even for Macri himself. Tens of billions of dollars from the loan financed capital flight, the economy fell into recession, inflation shot up, and Macri lost the presidential election of 2019.
IMF Managing Director Kristalina Georgieva raised concerns at the spring meetings of the IMF and World Bank in April, when she said, “[T]he country is going to go to elections, as you know, in October. And it is very important that they do not derail the will for change. So far, we do not see that. We do not see that risk materializing, but I would urge Argentina, stay the course.”
This public endorsement of Argentine President Javier Milei came with a picture during the annual spring meetings in Washington showing Georgieva wearing a chainsaw lapel pin while posing for photos next to Federico Sturzenegger, the Argentine minister of deregulation. The chainsaw is a symbol that Milei has frequently used to brag about his mission of cutting state institutions, programs, and social spending generally. And so Georgieva’s embrace of it was met with outrage in Argentina.
Endorsing Milei is much worse than an embarrassment for the IMF. He has called climate change “another one of the lies of socialism.” He has also said that “all the policies that blame humans for climate change are false.” His chainsaw has especially targeted funding for science and technology, spurring a brain drain as scientists leave the country. His austerity measures have also impacted infrastructure and education, which have seen enormous reductions in real spending since December 2023, when Milei took office. Reductions in real pensions for the retired made up about a fifth of the spending cuts in 2024.
In addition to the $20 billion IMF loan, the Milei government has also announced agreements with the World Bank for a $12 billion package and up to $10 billion from the Inter-American Development Bank (IDB), both of which Washington dominates—similarly to the IMF. (The voting structure and deference to the United States within the World Bank and the IDB allows Washington, together with its allies, to prevail on almost any vote that matters to it.)
U.S. Treasury Secretary Scott Bessent has also stated that Washington could offer a credit line from the U.S. Exchange Stabilization Fund if Argentina were hit by an “external shock” up the road. The tens of billions of dollars of credit from the international financial institutions, plus a U.S. Treasury offer to supply more if needed, underscore Washington’s commitment to President Donald Trump’s “favorite president”—one of the strongest commitments in recent decades to any government in the hemisphere.
Milei has brought inflation down from when he took office: It was 161 percent for the year before he took office and fell to 43.5 percent for the year ending in May 2025. But much of the progress on inflation is due to the rise of the real value of the peso against the dollar. There remains a risk of a large upswing in inflation and poverty driven by a substantial depreciation of the peso.
After loosening controls in April, the Argentine authorities have prevented the slide of the peso through interventions in the foreign exchange market, selling an estimated $1 billion since the end of April. The question is how much and for how long it will be necessary to burn through dollars, intervening in the currency market.
The capital flight that the government is currently financing with these interventions was also a big problem under the 2018 IMF loan. Thus, despite its record-breaking size, the 2018 IMF loan of $57 billion still failed to stabilize the Argentine economy, given the attached conditions and the Argentine government’s management of it. The 2018 loan required a commitment to “expansionary austerity”—i.e., the government would tighten the budget and raise interest rates, which would supposedly attract investment. However, it did the opposite.
Argentina’s experience is unfortunately just one example of how much damage is caused by the IMF’s governance and, most importantly, its imposition of destructive macroeconomic policies.
Latin America suffered its worst economic growth in 100 years over a 20 year period when the IMF and Washington’s influence on economic policy in the region was at its peak from 1980 to 2000. This was an enormous economic failure that changed the hemisphere.
To take just two examples, both Mexico and Brazil would have reached European living standards if their economies had continued to grow at the rate that they did from 1960-1980. The abandonment of some of the failed “Washington Consensus” economic policies around the turn of the century helped enable a return to economic growth and social progress, as happened in Argentina. After more than two decades with no reduction in the poverty rate across Latin America, it fell from roughly 44 percent to 28 percent of the population from 2002 to 2014.
The prolonged economic failure from 1980-2000 was part of a worldwide downturn in the growth of per capita incomes—the most basic indicator of economic progress—in the vast majority of developing countries. Not surprisingly, this was accompanied by a substantial decline in progress on the most important social indicators for which there is data for almost all countries: life expectancy, infant and child mortality, adult mortality, and educational attainment. So economic failures in developing countries—including those stemming from policy decisions made in Washington—can cost many lives, as research on this has documented.
All of this indicates the urgent need to push for voting reform at the IMF. Though the IMF is supposed to be a multilateral institution of 191 countries, its decision-making is almost completely dominated by Washington, with support from its high-income allies, which mostly comprise European countries. Together, the United States, Europe, and a handful of other close U.S. allies make up more than 60 percent of the vote and they almost always vote together as a bloc.
It has been extremely rare for this bloc to fracture on a vote that is important to Washington. In addition, by the IMF’s charter, many important votes require an 85 percent majority, which gives the United States, with 16.5 percent of the vote, an automatic veto.
These prolonged policy failures would be very unlikely if most of the member countries of the IMF had real participation in decision-making. The IMF’s rules are a product of the world of 81 years ago, when it was created—when much of the world was living in countries that did not have political independence.
The IMF’s role in Argentina over the past three decades is a striking and well-documented case of how much the organization, with the involvement of Washington’s decision-makers, can influence the economic and political outcomes of a borrowing country. This influence can be seen as quite harmful on net, in terms of economic and social progress—especially if the terms of said IMF packages adversely impact key electoral issues like funding for healthcare, education, or social safety programs.
There is way too much concentrated and unaccountable power at the International Monetary Fund. For the sake of the planet and its people, this will have to change.