Washington (AFP) – Credit ratings agency Fitch upgraded Argentina’s sovereign debt rating to “CCC” from “CC” on Friday, citing improved ability to meet upcoming foreign debt payments and successful economic reforms under President Javier Milei.
Fitch said the upgrade, which maintains the country in junk status, reflects growing confidence in Argentina’s financial stability, bolstered by significant dollar inflows from a tax amnesty program that has already brought over $20 billion into the economy. The government of self-described “anarcho-capitalist” Milei has applied a drastic austerity program aimed at erasing the budget deficit and taming the high inflation that has plagued Argentina for years.
Yet Milei has maintained popular support despite implementing the tough economic adjustments, including cuts in energy and transport subsidies and thousands of public sector jobs. His policies have produced Argentina’s first budget surplus in 15 years but have also been blamed for plunging the country into a deep recession and driving the proportion of Argentines living in poverty up 11 points to 52.9 percent in the first half of 2024.
Fitch warned that significant challenges remain ahead, with Argentina facing large debt payments of $4.3 billion due in both January and July 2025. The country’s current international reserves of just $30 billion remain constrained, with $18.3 billion tied up in a Chinese currency swap agreement and $5.4 billion held in gold.
Inflation has shown marked improvement, falling to 2.7 percent in October, its lowest level since 2021. This progress has allowed the central bank (BCRA) to begin reducing interest rates. While Fitch projects the economy to contract by 3.6 percent in 2024, on the back of the radical austerity plan, it forecasts a resounding rebound of 3.9 percent in 2025. The recovery will largely depend on the government’s foreign exchange policies and the outcome of crucial midterm elections in October 2025, Fitch said.
© 2024 AFP
