An influential Wall Street bank has set a date for the end of the dollar restriction
Amid negotiations between Javier Milei's government and the International Monetary Fund (IMF) , Bank of America (BoFA) , one of the largest on Wall Street , praised the measures adopted by the economic team, predicted when the exchange rate restrictions will be eliminated and projected a strong rebound of the economy in 2025 after last year's contraction.
The document highlights that the ruling party hopes to seal a new agreement with the IMF in April, which implies a disbursement of fresh funds. In fact, the Minister of Economy Luis Caputo repeated several times that they plan to sign the agreement before the end of the first four months and Milei announced that capital controls will cease to exist as of January 1, 2026 .
BoFA projected when the exchange rate cap will be eliminated"International reserves were under pressure due to external debt payments and the intervention of the BCRA in the parallel exchange market. The appreciation of the real exchange rate has raised concerns about an overvaluation . The gap between the parallel exchange rate and the official rate decreased to 10-15% after having reached 54% last year," the report lists.
In this regard, BoFA stressed that the net holdings of the Central Bank of the Argentine Republic (BCRA) "continue to be low" and are in negative territory of -US$ 6,000 million , despite the fact that the monetary authority has purchased more than US$ 20,000 million since the libertarian arrived at the Casa Rosada.
The author of the text also stressed that the outlook for foreign direct investment and energy export growth "is positive", although " a current account deficit of 0.7% of GDP is expected this year, after a surplus in 2024 ".
Regarding the flow of foreign currency entering the Free Exchange Market (MLC), they highlighted that the money laundering "left 12 billion dollars in new foreign currency deposits since mid-August, which supports external debt payments."
As for the definitive lifting of the exchange rate restrictions , the US bank predicted a "quicker elimination after the elections and the unification of the exchange rate by December ", in line with the timing expressed by the Argentine president.
Regarding the new exchange rate system, the North American entity stressed that the Central Bank should implement a "dirty float" regime, abandoning the 1% monthly crawling peg regime that has been in force since February 2025. Between December 2024 and January of this year, the devaluation rate had been 2% and acted as an inflationary anchor.
The scheme proposed by BoFA involves an official dollar free from current restrictions but with a certain degree of intervention by the Central Bank with the aim of influencing the value of the currency and, in this way, avoiding excessive or destabilizing fluctuations in its price.
During a presentation at the Torcuato Di Tella University, the director of the BCRA, Federico Furiase , hinted that they had already designed the exchange rate structure that will be applied after the currency controls. “It is clear that Argentina must have limited monetary volatility,” Furiase stressed, and maintained that other countries managed to control inflation through “ a managed float that controls currency volatility .”
Inflation, activity and fiscal accounts: BoFA projectionsOn the other hand, international analysts acknowledged that the speed of prices decreased much faster than they expected and attributed the slowdown in inflationary dynamics to the " major fiscal adjustment " and a "slow depreciation" of the official exchange rate.
" We expect inflation to continue to decline to 27% this year , from 118% in 2024 (211% in 2023). We expect a recovery in Gross Domestic Product (GDP) of 5% this year , after a recession of 1.9% last year. GDP has recovered strongly in the second half of the year, driven by rapid growth in bank lending, the energy boom and recovering wages," they said.
In fiscal matters, they considered that a zero deficit is feasible in 2025 after the Government accumulates a financial surplus of 0.3% of GDP in 2024 thanks to a 27% cut in public spending and despite the fact that the recession also affected the national State's income.
"We believe the government will maintain a zero fiscal deficit in 2025 (fiscal rule: primary surplus equal to interest payments). We think a balanced budget is possible due to the recovery of activity (GDP will grow by 5%) and additional cuts in energy subsidies, which will offset the import tax that expired last year," concludes the report from the Wall Street giant.
MFN / Gi
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