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By Shashank Pattekar, International Banker
On July 9, Argentina paid $4.3 billion to holders of its foreign-law bonds without issuing new debt in global markets. The payment formed part of a wider plan to meet the Ministry of Treasury’s $19.2- billion gross financing requirement for 2026 through local-law dollar bonds, bank loans, multilateral support and privatisation proceeds. With tens of billions of dollars of foreign-currency debt service due in 2027 and a presidential election expected in October of that year, however, the bigger challenge for Milei lies ahead.
In May, the International Monetary Fund (IMF) estimated the country’s consolidated public-sector foreign-currency debt service at $32.3 billion, comprising $23.3 billion of principal and $9 billion of interest. That figure included $5.2 billion of the Argentine central bank’s (Banco Central de la República Argentina, or BCRA) repo (repurchase agreement) payments, scheduled for 2027 that were subsequently refinanced into a new facility maturing in September 2028. The government’s current financing programme separately puts the Treasury’s 2027 gross financing need at $24.9 billion.
Argentina’s total debt is much larger than the amount it must repay in 2027. As of August 31, the Finance Secretariat reported $484.9 billion in gross Central Administration debt, of which just $2.5 billion was pending restructuring or classified as deferred payment. Of the remaining $482.4 billion, approximately $247.5 billion was payable in foreign currencies.
Milei’s fiscal consolidation drive has made repaying that requirement more credible. In the first eight months of the year, the national public sector recorded a primary surplus of approximately 1.1 percent of GDP and an overall surplus of about 0.2 percent of GDP. Nonetheless, dollar liquidity remains the key challenge. The Treasury raises most of its revenue in pesos while servicing substantial obligations in foreign currencies. Argentina must therefore maintain access to reserve purchases, domestic dollar funding, official lenders, privatisation receipts and/or global bond markets throughout an election year.
Although the economic backdrop has improved, growth has lost some momentum more recently. Monthly inflation has fallen markedly from 25.5 percent in December 2023 to just 1.7 percent by August 2026, while GDP expanded by 4.4 percent in 2025. The second quarter of this year, however, saw seasonally adjusted GDP contract by 0.6 percent, while economic activity in July was 1.4 percent below its level a year earlier. While Milei’s stabilisation has reopened financing channels, therefore, weaker activity could make the political and fiscal gains harder to sustain.
Markets have rewarded Argentina’s progress under Milei. Sovereign debt returned about 8.3 percent during the first half of 2026, the strongest performance in Latin America, according to a Bloomberg measure. Fitch Ratings and S&P Global Ratings raised Argentina to B- earlier in 2026, and Moody’s Ratings followed on July 21 with a B3 rating and positive outlook. The country-risk spread—the extra yield over comparable US Treasuries—narrowed from 1,456 basis points before the October 2025 congressional elections to about 420 in early July 2026, before widening again to roughly 630–640 basis points by late September.
An international bond sale looked more plausible in July, but the subsequent widening in spreads has increased its likely cost. The draft 2027 budget submitted to Congress on September 15 allows Argentina to issue bonds in international markets if conditions improve, but does not count on such a sale to fund its planned debt payments. Luis Caputo said on July 6 that Argentina would seek the cheapest available way to refinance its debt, but did not confirm any specific yield threshold that would prompt a return to international bond markets. “If we have cheaper options, naturally we’re going to continue with that option,” Argentina’s Minister of Economy added.
Waiting may reduce the cost, but election-related volatility could close the window of opportunity. Indeed, the rise in spreads since July shows how quickly a potential issuance window can narrow ahead of an election.
With global issuance deferred, the Treasury has relied on local-law dollar bonds, which raised about $1 billion in 2025 and more than $3 billion through May 2026, and the proceeds of privatising major state-controlled hydroelectric companies, which generated more than $700 million. Separately, the BCRA refinanced all $6 billion of its 2026–27 repo maturities into a new $6-billion facility due in September 2028. Although the issued bonds create future obligations for Argentina, the hydroelectric concessions provide one-off receipts, and the repo refinancing postpones central bank maturities.
Multilateral guarantees have further increased the available financing. Argentina obtained $2 billion from BBVA (Banco Bilbao Vizcaya Argentaria, S.A.) and Santander under World Bank Group (WBG) guarantees covering 95 percent of its debt-service payments and $1.2 billion from Deutsche Bank, with up to $550 million protected by an Inter-American Development Bank (IDB) guarantee. The facilities lower borrowing costs, but the extensive protection shows that comparable unsecured access has not returned. They improve liquidity without reducing gross debt.
The Argentine government’s July 2026 financial programme projects $22.9 billion of funding against the Treasury’s $19.2-billion requirement in 2026, potentially leaving a $3.7-billion surplus to help meet its 2027 obligations. Even so, its 2027 plan assigns $2 billion to unspecified sources and $1.5 billion to unfinished privatisations, which together total a significant 14 percent of the $24.9-billion requirement. “Demonstrating market access would be positive, but they’re right to say it shouldn’t be at any cost,” according to Graham Stock, senior emerging markets strategist at RBC BlueBay Asset Management.
While reserve accumulation has improved, the usable buffer remains thin. The BCRA’s gross reserves reached $48.3 billion at the end of August, up from $44.9 billion at the end of June. The Treasury still needs to obtain dollars for its own debt payments—relying on central bank reserves for those payments could weaken the buffer that supports confidence in the peso.
The IMF has expressed considerable confidence in the progress made in debt repayment, although the formal staff assessment warned that low liquid reserves continued to threaten repayment capacity. “Argentina has made all of its payments to the fund, and we are confident that they will continue to do so,” the IMF’s communications director, Julie Kozack, said on June 25, before the fund’s managing director, Kristalina Georgieva, visited the country on July 27.
Exchange-rate movements complicate reserve accumulation. Excessive currency appreciation supports a rise in import demand and a decline in export competitiveness, while a sharp depreciation would risk another rise in inflation and dollar demand. As such, the BCRA must continue to buy foreign exchange, but without signalling to households and businesses that the peso is seriously mispriced.
Election uncertainty intensifies that trade-off, especially as households and companies typically boost their dollar holdings prior to a vote. The resulting pressure would then weaken the peso. It may also reduce reserves if the BCRA sells dollars to support the currency.
“Every election in Argentina appears to be so binary,” Pablo Goldberg, head of research and portfolio manager for BlackRock’s Emerging Market Debt Team, told the Buenos Aires Times on July 1. “Until the swings of the past are gone and there is a more sustainable path forward, the market will continue to trade with a bit of a premium to get paid for that volatility.” Signs of weaker support for Milei, therefore, could push up Argentina’s borrowing costs even before its fiscal position worsens.
Stronger exports offer the most durable source of additional dollars. By early September, 23 projects approved under the large-investment incentive programme represented approximately $49.8 billion of declared investment, concentrated in mining and oil and gas, with smaller numbers in power, infrastructure and steel. As they enter production, higher net exports are expected to expand the supply of foreign currency and give the BCRA greater scope to accumulate reserves. Indeed, the Organisation for Economic Co-operation and Development (OECD) predicted that agriculture, energy and critical minerals would support growth of 2.6 percent in 2026 and 3.0 percent in 2027, according to its September interim outlook.
Much of the anticipated increase in export income, however, is expected from late 2027 onwards, which could potentially be too late to cover debt payments falling due earlier in the election year. According to Jaime Reusche, a senior credit officer at Moody’s Ratings, alternative financing and stronger exports could allow Argentina to meet its obligations without global market access. “The problem is that that inflection point comes right around the election, and so that’s where the political risks mix into the picture,” Reusche also warned.
While banks can provide dollar financing in the meantime, the limited depth of such facilities restricts the Treasury’s reliance on them. Private-sector credit reached 12.3 percent of GDP in June, remaining low by regional standards. Dollar loans equalled about 60 percent of dollar deposits, leaving some capacity to buy government debt. Heavier Treasury borrowing, however, could reduce funding for exporters and other businesses.
As for the views of Argentina’s electorate, much depends on whether households are ultimately uplifted by the recovery. Unemployment edged up from 7.5 percent in late 2025 to 7.9 percent in the second quarter of 2026. In the 31 urban areas covered by INDEC’s poverty survey, the share of people below the poverty line rose from 28.2 percent in the second half of 2025 to 32.3 percent in the first half of 2026. These figures weaken the assumption that lower inflation and fiscal stability will, by themselves, preserve voter support through the debt test. “Milei’s problem is no longer whether the macro story is believable abroad,” Mariano Machado of risk consultancy Verisk Maplecroft told Reuters on July 27. “It is whether voters can feel it at home.”
Argentina faces a timing trade-off: It could continue waiting for a reduction in borrowing costs but doing so would concentrate refinancing risk around the October election. “There is a wall of maturities building over the next couple of years, and buying some insurance against this would help,” Pablo Goldberg also contended. A modest pre-election foreign-law bond sale could diversify funding and demonstrate market access, but it might also lock in a higher interest cost than is acceptable to Minister of Economy Caputo.
Milei has made passage through 2027 plausible. Success will depend on converting fiscal credibility into reserve accumulation and dependable financing before electoral uncertainty intensifies. Local bonds, guaranteed loans and privatisation proceeds can provide a temporary bridge, while energy, mining and agricultural exports must eventually replace them as the principal source of additional dollars. The remaining question then is whether that bridge will last until the export income arrives.
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The post Can Milei Tackle Argentina’s Mounting Debt Challenges Ahead of the 2027 Presidential Election? appeared first on International Banker.
On July 9, Argentina paid $4.3 billion to holders of its foreign-law bonds without issuing new debt in global markets. The payment formed part of a wider plan to meet the Ministry of Treasury’s $19.2- billion gross financing requirement for 2026 through local-law dollar bonds, bank loans, multilateral support and privatisation proceeds. With tens of billions of dollars of foreign-currency debt service due in 2027 and a presidential election expected in October of that year, however, the bigger challenge for Milei lies ahead.
In May, the International Monetary Fund (IMF) estimated the country’s consolidated public-sector foreign-currency debt service at $32.3 billion, comprising $23.3 billion of principal and $9 billion of interest. That figure included $5.2 billion of the Argentine central bank’s (Banco Central de la República Argentina, or BCRA) repo (repurchase agreement) payments, scheduled for 2027 that were subsequently refinanced into a new facility maturing in September 2028. The government’s current financing programme separately puts the Treasury’s 2027 gross financing need at $24.9 billion.
Argentina’s total debt is much larger than the amount it must repay in 2027.
Argentina’s total debt is much larger than the amount it must repay in 2027. As of August 31, the Finance Secretariat reported $484.9 billion in gross Central Administration debt, of which just $2.5 billion was pending restructuring or classified as deferred payment. Of the remaining $482.4 billion, approximately $247.5 billion was payable in foreign currencies.
Milei’s fiscal consolidation drive has made repaying that requirement more credible. In the first eight months of the year, the national public sector recorded a primary surplus of approximately 1.1 percent of GDP and an overall surplus of about 0.2 percent of GDP. Nonetheless, dollar liquidity remains the key challenge. The Treasury raises most of its revenue in pesos while servicing substantial obligations in foreign currencies. Argentina must therefore maintain access to reserve purchases, domestic dollar funding, official lenders, privatisation receipts and/or global bond markets throughout an election year.
Although the economic backdrop has improved, growth has lost some momentum more recently. Monthly inflation has fallen markedly from 25.5 percent in December 2023 to just 1.7 percent by August 2026, while GDP expanded by 4.4 percent in 2025. The second quarter of this year, however, saw seasonally adjusted GDP contract by 0.6 percent, while economic activity in July was 1.4 percent below its level a year earlier. While Milei’s stabilisation has reopened financing channels, therefore, weaker activity could make the political and fiscal gains harder to sustain.
Markets have rewarded Argentina’s progress under Milei. Sovereign debt returned about 8.3 percent during the first half of 2026, the strongest performance in Latin America, according to a Bloomberg measure. Fitch Ratings and S&P Global Ratings raised Argentina to B- earlier in 2026, and Moody’s Ratings followed on July 21 with a B3 rating and positive outlook. The country-risk spread—the extra yield over comparable US Treasuries—narrowed from 1,456 basis points before the October 2025 congressional elections to about 420 in early July 2026, before widening again to roughly 630–640 basis points by late September.
An international bond sale looked more plausible in July, but the subsequent widening in spreads has increased its likely cost. The draft 2027 budget submitted to Congress on September 15 allows Argentina to issue bonds in international markets if conditions improve, but does not count on such a sale to fund its planned debt payments. Luis Caputo said on July 6 that Argentina would seek the cheapest available way to refinance its debt, but did not confirm any specific yield threshold that would prompt a return to international bond markets. “If we have cheaper options, naturally we’re going to continue with that option,” Argentina’s Minister of Economy added.
Waiting may reduce the cost, but election-related volatility could close the window of opportunity. Indeed, the rise in spreads since July shows how quickly a potential issuance window can narrow ahead of an election.
With global issuance deferred, the Treasury has relied on local-law dollar bonds, which raised about $1 billion in 2025 and more than $3 billion through May 2026, and the proceeds of privatising major state-controlled hydroelectric companies, which generated more than $700 million. Separately, the BCRA refinanced all $6 billion of its 2026–27 repo maturities into a new $6-billion facility due in September 2028. Although the issued bonds create future obligations for Argentina, the hydroelectric concessions provide one-off receipts, and the repo refinancing postpones central bank maturities.
Multilateral guarantees have further increased the available financing. Argentina obtained $2 billion from BBVA (Banco Bilbao Vizcaya Argentaria, S.A.) and Santander under World Bank Group (WBG) guarantees covering 95 percent of its debt-service payments and $1.2 billion from Deutsche Bank, with up to $550 million protected by an Inter-American Development Bank (IDB) guarantee. The facilities lower borrowing costs, but the extensive protection shows that comparable unsecured access has not returned. They improve liquidity without reducing gross debt.
The Argentine government’s July 2026 financial programme projects $22.9 billion of funding against the Treasury’s $19.2-billion requirement in 2026, potentially leaving a $3.7-billion surplus to help meet its 2027 obligations.
The Argentine government’s July 2026 financial programme projects $22.9 billion of funding against the Treasury’s $19.2-billion requirement in 2026, potentially leaving a $3.7-billion surplus to help meet its 2027 obligations. Even so, its 2027 plan assigns $2 billion to unspecified sources and $1.5 billion to unfinished privatisations, which together total a significant 14 percent of the $24.9-billion requirement. “Demonstrating market access would be positive, but they’re right to say it shouldn’t be at any cost,” according to Graham Stock, senior emerging markets strategist at RBC BlueBay Asset Management.
While reserve accumulation has improved, the usable buffer remains thin. The BCRA’s gross reserves reached $48.3 billion at the end of August, up from $44.9 billion at the end of June. The Treasury still needs to obtain dollars for its own debt payments—relying on central bank reserves for those payments could weaken the buffer that supports confidence in the peso.
The IMF has expressed considerable confidence in the progress made in debt repayment, although the formal staff assessment warned that low liquid reserves continued to threaten repayment capacity. “Argentina has made all of its payments to the fund, and we are confident that they will continue to do so,” the IMF’s communications director, Julie Kozack, said on June 25, before the fund’s managing director, Kristalina Georgieva, visited the country on July 27.
Exchange-rate movements complicate reserve accumulation. Excessive currency appreciation supports a rise in import demand and a decline in export competitiveness, while a sharp depreciation would risk another rise in inflation and dollar demand. As such, the BCRA must continue to buy foreign exchange, but without signalling to households and businesses that the peso is seriously mispriced.
Election uncertainty intensifies that trade-off, especially as households and companies typically boost their dollar holdings prior to a vote. The resulting pressure would then weaken the peso. It may also reduce reserves if the BCRA sells dollars to support the currency.
“Every election in Argentina appears to be so binary,” Pablo Goldberg, head of research and portfolio manager for BlackRock’s Emerging Market Debt Team, told the Buenos Aires Times on July 1. “Until the swings of the past are gone and there is a more sustainable path forward, the market will continue to trade with a bit of a premium to get paid for that volatility.” Signs of weaker support for Milei, therefore, could push up Argentina’s borrowing costs even before its fiscal position worsens.
Stronger exports offer the most durable source of additional dollars. By early September, 23 projects approved under the large-investment incentive programme represented approximately $49.8 billion of declared investment, concentrated in mining and oil and gas, with smaller numbers in power, infrastructure and steel. As they enter production, higher net exports are expected to expand the supply of foreign currency and give the BCRA greater scope to accumulate reserves. Indeed, the Organisation for Economic Co-operation and Development (OECD) predicted that agriculture, energy and critical minerals would support growth of 2.6 percent in 2026 and 3.0 percent in 2027, according to its September interim outlook.
Much of the anticipated increase in export income, however, is expected from late 2027 onwards, which could potentially be too late to cover debt payments falling due earlier in the election year. According to Jaime Reusche, a senior credit officer at Moody’s Ratings, alternative financing and stronger exports could allow Argentina to meet its obligations without global market access. “The problem is that that inflection point comes right around the election, and so that’s where the political risks mix into the picture,” Reusche also warned.
While banks can provide dollar financing in the meantime, the limited depth of such facilities restricts the Treasury’s reliance on them. Private-sector credit reached 12.3 percent of GDP in June, remaining low by regional standards. Dollar loans equalled about 60 percent of dollar deposits, leaving some capacity to buy government debt. Heavier Treasury borrowing, however, could reduce funding for exporters and other businesses.
As for the views of Argentina’s electorate, much depends on whether households are ultimately uplifted by the recovery. Unemployment edged up from 7.5 percent in late 2025 to 7.9 percent in the second quarter of 2026. In the 31 urban areas covered by INDEC’s poverty survey, the share of people below the poverty line rose from 28.2 percent in the second half of 2025 to 32.3 percent in the first half of 2026. These figures weaken the assumption that lower inflation and fiscal stability will, by themselves, preserve voter support through the debt test. “Milei’s problem is no longer whether the macro story is believable abroad,” Mariano Machado of risk consultancy Verisk Maplecroft told Reuters on July 27. “It is whether voters can feel it at home.”
Argentina faces a timing trade-off: It could continue waiting for a reduction in borrowing costs but doing so would concentrate refinancing risk around the October election. “There is a wall of maturities building over the next couple of years, and buying some insurance against this would help,” Pablo Goldberg also contended. A modest pre-election foreign-law bond sale could diversify funding and demonstrate market access, but it might also lock in a higher interest cost than is acceptable to Minister of Economy Caputo.
Milei has made passage through 2027 plausible. Success will depend on converting fiscal credibility into reserve accumulation and dependable financing before electoral uncertainty intensifies. Local bonds, guaranteed loans and privatisation proceeds can provide a temporary bridge, while energy, mining and agricultural exports must eventually replace them as the principal source of additional dollars. The remaining question then is whether that bridge will last until the export income arrives.
Go to top
The post Can Milei Tackle Argentina’s Mounting Debt Challenges Ahead of the 2027 Presidential Election? appeared first on International Banker.
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