By Rodrigo Campos
NEW YORK, July 2 (Reuters) – Argentina faces a foreign-currency debt test in 2027, the year President Javier Milei is expected to seek re-election, but investors are increasingly confident he can find a way through as fiscal discipline and economic stability improve.
The South American country is looking at over $23 billion in foreign-currency principal payments in 2027, or more than $32 billion including interest, according to International Monetary Fund figures. That’s among the biggest single-year debt payments it has faced since 2022-23, although in that case the IMF was also disbursing billions Argentina used to pay the fund back.
The fund, which gave Argentina a pass in May given that net international reserves accumulation remained below the program’s targets, said last week it was confident of being repaid. Even so, its latest staff report warned of “exceptional risks”, saying that while Argentina’s debt is sustainable, there is not a high probability it will remain so.
The challenge lands before expected export gains from the booming energy and mining sectors fully materialize, leaving 2027 as a test of whether Milei’s reforms can generate enough dollars to avoid renewed market stress.
The 2027 election is a risk for investors because Argentina’s financing plan rests on confidence as much as it does cash. Milei’s fiscal adjustment and red-tape cutting have reassured markets and entrepreneurs, but signs of a weaker mandate or a policy reversal could revive the familiar election-year rush into dollars, pressuring the peso and testing bondholders’ confidence.
Market stress, which last year helped trigger an emergency U.S. support package, has eased substantially in recent months. Argentina’s country risk premium — the extra return investors demand to hold its debt over U.S. Treasuries — has narrowed to as low as 420 basis points, its lowest level in eight years.
The improvement reflects Milei’s tight fiscal stance, a resumption of central bank dollar purchases, and the government’s success in securing short-term, low-cost financing that has reduced the need to tap international bond markets. That backdrop helps explain why investors have become more comfortable with a debt wall that until recently looked far more daunting.
The economy has returned to growth and Argentina is rebuilding access to hard-currency funding. Yet it still lacks reserve buffers that would make a presidential election-year repayment hump look routine.
“There’s no sugar coating it: Argentina’s 2027 debt maturities are sizable and coincide with a pivotal general election,” said Alejo Czerwonko, chief investment officer for Emerging Markets Americas at UBS Global Wealth Management.
Still, Argentina has “one of the most resourceful and creative finance teams in the world,” he said, and has worked to get ahead of the challenge through domestic-law dollar bonds, loans from international financial institutions and other financing. The United States has already provided extraordinary support to Argentina under Milei, a Trump administration ally, and more official U.S. lending cannot be ruled out, Czerwonko said.
MUDDLING THROUGH
The improving sentiment is notable because Argentine debt remains firmly rated deep in junk territory even after recent sovereign credit rating upgrades from S&P Global and Fitch. Moody’s, which upgraded Argentina a year ago and gave it a stable outlook, has become more optimistic about the country’s ability to get through the 2027 payments.
“We see that the financing flows are becoming much more comfortable for the sovereign, and that there is an increasing likelihood that they’re going to be able to meet all of their (2027) commitments, even without market access,” said Jaime Reusche, senior credit officer for sovereign risk at Moody’s Ratings. Argentina could “muddle through” by drawing somewhat on reserves, he said, helped by alternative financing and the expected boost to external accounts from exports.
“We clearly won’t face a dollar shortage next year, because we have a significant trade surplus and all debt maturities are pre-financed,” said a spokesperson for the Economy Ministry.
IMF staff said in a May report that projects approved under Argentina’s large-investment incentive programs exceeded $25 billion. The programs, which offer tax, customs and foreign-exchange benefits for long-term projects, mainly in energy, mining, infrastructure and agribusiness, will likely boost dollar inflows over time.
Much of that payoff, however, remains ahead. Large projects must still move from investment to production, leaving 2027 as a crucial bridge between Milei’s early stabilization efforts and a future increase in dollar inflows. Argentina has meanwhile reopened a financing channel that was effectively shut before Milei took office: cash-market dollar issuance under local law. Economy Ministry data show no such cash-market issuance between 2021 and 2024, before resuming with around $1 billion in 2025 and more than $3 billion through May this year.
Officials and investors say local-law dollar bonds, repo transactions and multilateral-backed financing are more than temporary stopgaps. The government has increasingly relied on those instruments to meet hard-currency needs while avoiding expensive international bond issuance.
Moody’s does not see a return to global capital markets as essential to Argentina’s debt sustainability, Reusche said, given expected export growth from late 2027 and 2028.
“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 said.
(Reporting by Rodrigo Campos in New York; additional reporting by Nicolas Misculin in Buenos Aires; editing by Karin Strohecker, Christian Plumb and Stephen Coates)
