S&P Global Ratings has maintained Argentina’s ‘CCC/C’ long- and short-term foreign and local currency sovereign credit ratings, while also affirming its ‘raB+’ national scale rating. The ratings outlook remains stable. Notably, the transfer and convertibility assessment was upgraded to ‘B-‘ from ‘ CCC (WA:CCCP)’ on February 5, 2025.

This decision reflects recent progress in fiscal outcomes and reducing inflation, alongside structural reforms initiated by the Milei administration to address long-standing economic weaknesses. Despite these improvements, Argentina’s economic conditions remain delicate, with external liquidity still a concern.

Argentina’s ratings could be lowered over the next 12 months if negative developments impede the sovereign’s already limited access to financing. On the other hand, improved external liquidity and declining economic vulnerabilities could prompt a ratings increase if they lead to sustained economic recovery and improved access to funding from external capital markets and multilateral lending agencies.

The Milei administration has made significant strides towards market-oriented economic policies, reducing inflation, and eliminating fiscal deficits. These efforts have set the stage for economic stabilization and sustained growth. However, Argentina’s history of macroeconomic instability and sharp changes in economic policy underpin the low credibility and predictability of its governing institutions.

The country’s long-term economic performance has been volatile. Argentina has defaulted five times on foreign currency sovereign debt and seven times on local currency debt in the 21st century. The latest default occurred in March 2024. Since then, the government has remained current on debt servicing but faces significant foreign currency debt service to commercial and official creditors in 2025 and 2026.

In January 2025, the government undertook two local currency debt exchanges, with investors tendering bonds worth around $14.5 billion. Further recourse to debt exchanges at such low rating levels could lead to these transactions being considered distressed and equivalent to default.

President Javier Milei has implemented radical changes, shifting towards market-oriented economic policies designed to stabilize the economy. His party, Freedom Advances (La Libertad Avanza, or LLA), could gain seats in Congress in late 2025 if inflation continues to fall and the economy recovers.

Argentina’s growth remains worse than that of other countries at a similar level of wealth. The GDP is expected to grow 4% or more this year, but these projections are subject to uncertainty. A new agreement with the IMF could help gain more access to external liquidity and support growth.

Argentina has a vulnerable external profile, with substantial financing needs, and poor access to external capital markets. However, the government has taken measures to boost the effectiveness of monetary policy. The central bank has transferred its remunerated liabilities to the government and stopped issuing new debt.

The government faces external debt payments of over $17 billion in 2025, emphasizing the need to boost its external liquidity. The government ran a near balanced budget in 2024 and a primary fiscal surplus of just above 2% of GDP, largely due to a significant decline in social spending.

In 2025, the government is likely to run a near balanced fiscal outcome and a primary surplus exceeding 2% of GDP. The high share of foreign currency debt and volatility in inflation create much uncertainty about S+P’s projections for debt metrics because they are vulnerable to swings in the currency.

The banking sector of Argentina is classified in group ‘9’ according to S+P’s Banking Industry Country Risk Assessment (BICRA), with ‘1’ being the lowest risk category and ’10’ the highest. Argentina has a small financial system, with domestic credit to the private sector less than 10% of GDP.