The rating agency has highlighted that dollar inflows driven by a successful tax amnesty have begun to boost international reserves and should continue to do so as they circulate in the financial system, supporting sovereign access to dollars.
Fitch Ratings has upgraded Argentina's rating from 'CC' to 'CCC' based on certain economic developments that have improved the credit agency's confidence in the ability of Javier Milei's government to make upcoming foreign currency bond payments without seeking some form of relief.
Among others, Fitch has highlighted that dollar inflows driven by a successful tax amnesty have begun to boost international reserves and should continue to do so as they circulate in the financial system, supporting sovereign access to dollars.
In addition, the authorities are also studying several options for external financing, although none of them have materialised to date.
The BCRA's reserves have begun to strengthen again after a mid-year setback, as private sector capital inflows have more than offset capital outflows from sovereign external debt service, which has also prompted Fitch Ratings to upgrade the solvency rating.
On the political front, Milei has made progress on his reform agenda despite his party's small representation in Congress, achieving some legislative victories and avoiding major setbacks. In addition, the president retains "favorable popular support" despite the pain induced by economic adjustments.
How his party fares in the October 2025 midterm elections will be critical to the economic outlook, either strengthening or undermining Milei’s ability to advance his agenda.
The Government of Argentina remains committed to an economic stabilization program focused on aggressive fiscal adjustment to undo past monetary financing by the Central Bank of the Republic of Argentina, a crawling exchange rate, negative real interest rates to reduce the excess of remunerated liabilities in pesos, and the preservation of exchange controls to sustain these policies.
RISKS TO PAYMENT CAPACITY
Among the negative aspects for Argentina, Fitch has pointed out that there are still risks to the ability to pay, as reflected in the 'CCC' rating, given the still uncertain prospects for a transition towards monetary and exchange rate policies that can guarantee a lasting improvement in reserves and the recovery of market access.
Policy differences with the IMF also continue to cloud prospects for a new program with fresh funding, and it remains unclear whether or how quickly the upcoming change in the U.S. administration could facilitate a deal.
Similarly, the agency sees the preservation of exchange controls as likely to constrain a strong rebound in investment, although a new strategic sector incentive regime (RIGI) and microeconomic reform efforts should offer support.
Looking ahead, the possibility of policy setbacks or political shocks that undermine macroeconomic stability and prospects for regaining market access could lead to a rating downgrade.
On the contrary, sustained accumulation of international reserves and regained access to the bond market, as well as large-scale external financing of some kind, would lead to an upgrade of the rating action.
