Written By: Arjun Patel
When Argentinian President Javier Milei was elected, the country was attempting to manage a financial crisis. Inflation consistently remained above 200%, and constant-price increases had reduced the purchasing power of wages, leaving basic food and medicines unaffordable for most citizens (Gonzalez, 2025). The central challenge Milei’s government faced was to halt the peso’s decline while restoring investor confidence.
Milei’s approach was vastly different from past policies. His government eliminated many subsidies, opened Argentina’s markets to international cooperation, and made the central bank independent from executive interference. These decisions were backed by promises to avoid financing deficits by expanding the monetary base (Reuters, 2025).
Within less than a year, results began to emerge. Argentina’s annual inflation decreased to just 31.8% by November 2025, the lowest level in more than seven years (Callanan & Zhang, 2025). This shows vast improvement, especially given the scale of the crisis that the administration faced upon Milei’s inauguration. The United States also provided significant support, drawing nearly $1 billion from its holdings of IMF reserves to help Argentina meet key debt obligations and to stabilize the peso (Callanan & Zhang, 2025).
However, despite positive trends in inflation, challenges persist, and the underlying economic environment is far from secure. Argentina’s lower inflation did not immediately bring relief to most lower and middle-class Argentines, who still faced high prices for food, rent, and utilities (Cachanosky, 2025). Many families continued to struggle with the removal of subsidies and fiscal tightening, which most prominently affected vulnerable populations (Cachanosky, 2025). Surveys as of late 2025 indicated substantial public discontent, and protests against the government’s austerity measures persisted in Buenos Aires and other major cities (France 24, 2025).
At the heart of the public discontent and consumer issues is Argentina’s monetary crisis. Argentina functions less as a conventional single‑currency economy and more as a de facto bi‑monetary system, in which the central bank issues a currency that many citizens try to avoid holding whenever possible (Libman, et al., 2025). They use the peso for most wages and domestic transactions, and the U.S. dollar as the preferred unit of account and store of value. Their reliance on the USD can be attributed to the population’s distrust of the domestic currency stemming from the country’s history of frequent and disruptive financial crises (Bolle, 2024). Firms routinely use dollars to record transactions, companies price big‑ticket items like real estate in dollars, and people hold a significant share of their savings in cash dollars or dollar bank deposits, reflecting deep distrust in the peso after repeated devaluations, defaults, capital controls, and deposit freezes (Debre, 2025). Argentina has thus become so reliant on the United States Dollar that full dollarization has been taken into account as a potential option. However, dollarization would sacrifice monetary sovereignty, require a large stock of reserves to convert pesos into dollars, and leave Argentina highly exposed to external shocks (Bolle, 2024).
Another significant issue facing the Argentinian economy is that domestic banks don’t hold sufficient reserves, which could prolong the country’s debt crisis. Though the banks hold $54 billion in reserves, much of this is tied up in emergency funds or holdings that come from foreign entities (such as China, the IMF, and the US). As such, Argentina has a modest $10 billion in truly usable reserves (Setser, 2025). Argentina also faces substantial external debt payments in 2026 ($5 billion in principal and $3 billion in interest) on the government’s external debt. Most of that is due in January 2026, and there are even larger quantities owed in the second half of 2026. In other words, Argentina’s usable reserves will decline to critical levels within the early months of 2026 and eventually reach negative amounts, leading Argentina to default on its debt (IMF 2025).
Much of the crisis has come as a result of Argentina relying on foreign countries for financial stimulus, leading to heavy dependence and debt to foreign entities. Since Milei’s stabilization strategy relies on stable exchange rates and steady currency devaluation, external shocks can quickly impair the currency’s credibility. Historically, when markets fear that export earnings won’t be able to cover imports and debt service, the peso’s strength comes into risk, which would cause inflation. Attempting to avoid this, authorities spend already scarce bank reserves to defend the peso (Bianchi, 2025). This is dangerous in and of itself due to Argentina’s growing debt crisis
President Javier Milei’s government has delivered an indisputable reduction in one of the world’s worst inflation crises in recent history. However, Argentina still has plenty of reforms to implement, especially in fixing the currency crisis, regulating its monetary policy, and retaining investor confidence. Without a more coherent policy plan on their behalf, the country risks losing its hard-won gains and failing to turn such a reduction in inflation into meaningful quality-of-life improvements for the general population.
References
Maudricardo, Claudio (2025, September 11). A Buenos Aires battuto Milei.
Associated Press. (2025, May 22). Argentina’s Milei unveils bold plan to lure billions in undeclared
dollars. AP News.
https://apnews.com/article/argentina-dollars-milei-us-economic-crisis-imf-tax-authority-fbe36a2
f7d716fde56096f4d1445715
Atlantic Council. (2025, August 26). A milestone on Argentina’s long road to recovery.
Atlantic Council. (2025, October 26). Milei just got a midterm boost. What’s next for Argentina?
https://www.atlanticcouncil.org/content-series/fastthinking/milei-just-got-a-midterm-boost-whats
next-for-argentina/
Bianchi, W. (2025, October 8). Argentine Treasury burns through dollars to defend peso as US aid talks
loom. Reuters.
Buenos Aires Times. (2025, October 12). IMF backs Argentina growth outlook as others trim forecasts.
https://www.batimes.com.ar/news/economy/imf-backs-argentina-growth-forecast-but-others-trim
forecasts.phtml
Cachanosky, N. (2025). Javier Milei’s economic policy in Argentina. GIS Reports.
https://www.gisreportsonline.com/r/javier-milei-argentina
Cato Institute. (2025, October 11). Liberty versus power in Milei’s Argentina.
https://www.cato.org/free-society/fall-2025/liberty-versus-power-mileis-argentina
GZERO Media. (2025, November 13). Graphic truth: Inflation plunges in Argentina.
https://www.gzeromedia.com/graphic-truth/graphic-truth-inflation-plunges-in-argentina
International Monetary Fund. (2025). Argentina: First review under the extended arrangement under the
extended fund facility (Country Report No. 2025/XXX).
Peterson Institute for International Economics. (2025, January 26). Milei in 2025: Between Argentina’s
mid-term elections and the IMF.
https://www.piie.com/blogs/realtime-economics/2025/milei-2025-between-argentinas-mid-term-
elections-and-imf
Reuters. (2025, June 12). Argentina inflation tumbles to five-year-low 1.5% in boost for Milei.
https://www.reuters.com/world/americas/argentina-inflation-cools-may-lowest-over-five-years-20
25-06-12/
Semafor. (2025, November 12). Argentina’s inflation rate falls to its lowest level in seven years.
https://www.semafor.com/article/11/13/2025/argentinas-inflation-slows-again-following-years-of-
crisis
Setser, B. (2025, November 1). Argentina needs foreign exchange reserves of its own. Council on Foreign
Relations. https://www.cfr.org/blog/argentina-needs-foreign-exchange-reserves-its-own
The Daily Economy. (2025, July 1). Milei’s economic miracle: How Argentina slashed inflation to 1.5%.
https://thedailyeconomy.org/article/mileis-economic-miracle-how-argentina-slashed-inflation-to-1
-5/