Anatomy of a recurring Argentine crisis: can it be different this time?

Macroeconomic instability in Argentina is rooted in recurring fiscal excesses, monetary overflows, and a history of non-compliance with financial commitments. These conditions have been aggravated over time by the use of exchange rate anchors – whether fixed exchange rates or managed floating schemes – for anti-inflationary purposes.

When the resulting exchange rate appreciation is not offset by improvements in investment and productivity, this usually leads to a deterioration in the external current account.

In this context, driven by factors that erode trust in the government, there have been repeated runs against the peso, forcing abrupt corrections. For case, In 2018, USD 11 billion of reserves were sold trying to defend a parity, but even so the peso ended up with a depreciation of 84%. When the reserve margin is low or there is no access to external credit, runs become more difficult to contain.

Another critical variable is the high percentage of Argentine savings abroad. In adverse times, that capital flees with greater intensity; In favorable scenarios, it fuels processes of exchange rate overvaluation. Currently, the stock of private external assets represents around 40% of GDP. This behavior is directly related to macro instability and the continuous alteration of the rules of the game, changes in beneficiaries of state income due to changes in government, and the mere probability of this occurring.

Thus, the loss of confidence – as was evident on September 7 – triggers portfolio changes capable of precipitating runs even in scenarios of apparent fiscal solvency.

Sometimes, external assistance contributes to prolonging the permanence of certain exchange rate regimes, and facilitates capital outflows at values ​​lower than those anticipated by the market in the absence of aid, achieving a temporary stabilization that is rarely sustained over time.

Experience shows: in the Convertibilityassistance lasted longer, but in the face of insufficient reforms or external and domestic shocks, the system collapsed. The adjustment was carried out through the least desired mechanism – an increase in interest rates -, making fiscal balance and social peace unfeasible.

Today there are certain conditions that would allow a currency run to be neutralized; others, essential to avoid failure, must be generated. Among the factors in favor, the fiscal balance stands out, since the current imbalance in the current account (1.7% of GDP, second quarter) is the result of private sector operations and, consequently, financed by the agents themselves.

Furthermore, deregulation and trade opening focus on improving productivity, although their results take time and face resistance, especially in inefficient factor markets.

Added to this is that the real depreciation of the multilateral exchange rate in 2025 (25%) within the agreed band contributed to mitigating the risk of appreciation.

Today’s real exchange rate is equivalent to that of April 2024, and although it is 12% more appreciated than the average of the last two decades, it does not in itself represent the main factor of instability.

Among the positive elements are the IMF assistance in April for USD 20,000 million under Extended Facilities and the recent swap of the same amount with the United States Treasury. There are also mechanisms for purchasing pesos and help to manage external credits.

However, these conditions have not yet managed to calm the situation. Demand for dollars remains high, increasing pressure on reserves even with restrictions, and the interest rate has climbed to triple-digit levels.

The future exchange rate as of May 2026 exceeds the ceiling of the projected band by 10%. The dominant risk is that the ongoing recession will hamper macroeconomic balance. It is thus similar to a bank run on a solid entity: although there is a fiscal surplus, confidence is eroded and savers do not renew deposits, mismatching assets and liabilities. The difference, in this case, is that the run is on the limited reserves of the Central Bank, aggravated by the impossibility of accessing the capital market.

In June 2025, the consolidated public debt was equivalent to 52% of GDP, with a financial surplus in the national public accounts. This suggests the absence of a solvency problem, although a serious liquidity problem persists. The maturities of external public debt total USD 15,000 million between 2025 and 2026 and USD 19,000 million in 2027. Even considering liquid reserves and the anticipated additional funding from the IMF and multilateral banks, there remains a gap to finance close to USD 25,000 million.

In this context, North American aid is relevant, but it does not solve all the needs. Even if the Government manages to reduce external debt over GDP with fiscal surpluses, the difficulty in achieving voluntary refinancing limits the medium-term strategy.

The market perceives that, beyond the aid received, the Government needs to rebuild international reserves and probably make adjustments to the exchange rate regime. Greater exchange rate flexibility appears to be a preferable option, since if rigidity persists in the face of a shock of distrust, the adjustment is immediately transferred to interest rates.

Furthermore, the Negotiation and political consensus are essential: The lack of agreements after the electoral defeat in September was a key factor for the bullfight. Another element of concern is the impossibility of refinancing large maturities of sovereign debt.

The official strategy to normalize the macro-financial front should include at least two of these three pillars:

1. Flexible exchange rate regime: The Government lacks privileged information to determine the optimal exchange rate, as happens with any other relevant price in the economy. Although historically the intervention sought to generate an anti-inflationary anchor without fiscal or monetary support, the current fiscal anchoring from 2024 constitutes the basis of the disinflation program. The little transfer to prices after the depreciation of 2025 shows that the exchange anchor is losing centrality. A scheme of hands-off floating It would allow the market to define the real equilibrium exchange rate and the central bank to gain autonomy in its monetary policy. Furthermore, flexibility would make it possible to react to internal and external shocks, placing the exchange rate at levels compatible with a process of structural transformation. Implementation, however, requires coordination and conditions of political and financial flexibility.
2. Debt management: Faced with the absence of access to voluntary financing, it is necessary to complement the support of multilaterals and the US Treasury with voluntary re-profiling strategies. The key would be smooth out expiration spikes through exchanges that extend terms without capital reduction – for example, to five years -, as recommended by best practices and international experiences. To incentivize deals, bonds collateralized with US Treasury assets can be used and existing instruments consolidated to improve their liquidity. International evidence shows that preventive and voluntary restructuring – prior to default – allows for a better recovery of investment and growth.
3. Forge long-term consensus: Reach agreements between the ruling party and the opposition on five-year fiscal goalsor on the establishment of stable budget rules, would help to consolidate confidence. Furthermore, the development of durable regulatory frameworks for high-potential sectors, such as agribusiness, energy, mining or the knowledge economy, would attract capital and minimize uncertainty.

Monetary and regulatory stability must become state policy. Only in this way will it be possible to significantly reduce uncertainty and create solid conditions for sustained growth and private investment.

The author is an economist. Former leading economist of the World Bank and former manager of the BCRA