Moody's Upgrades Argentina Two Notches, Cites Milei's Fiscal Surpluses and Falling Inflation

Moody's Ratings upgraded Argentina's government debt two notches, from Caa1 to B3, and shifted its outlook from stable to positive, according to Dow Jones Newswires. For a country that was flirting with default territory a few years ago, this represents a significant move.

Moody's cited Argentina's default risk decline because macroeconomic stabilization has moved beyond the initial adjustment phase. The agency specifically pointed to sustained fiscal surpluses, a decline in inflation, and continued economic liberalization as forces strengthening Argentina's policy credibility and cutting down macroeconomic volatility. Stronger export performance and rising foreign direct investment in energy and mining also contributed to the upgrade.

One number stands out: the central bank has purchased more than $11 billion in foreign exchange through the middle of this year without triggering exchange rate pressure, according to Moody's. That kind of reserve accumulation matters when a country is trying to convince global creditors it can pay its bills.

Milei's Bet Is Paying Off, So Far

Javier Milei took office in December 2023 promising to torch Argentina's inflation crisis and drag the economy toward market-friendly policy. He's been called extreme, a chainsaw-wielding libertarian, an ideologue. The fiscal numbers Moody's is now pointing to didn't happen by accident.

Moody's upgrade follows a similar move by Fitch Ratings in May, which bumped Argentina from CCC+ to B-. Fitch's upgrade came after Argentina's October elections, in which Milei emerged with what Dow Jones Newswires described as a stronger popular mandate. Two major ratings agencies moving in the same direction within a few months of each other signals a trend.

Skeptics of Milei's approach have a legitimate point: austerity has real costs. Cutting subsidies, slashing public spending, and letting inflation-fighting measures bite has meant genuine pain for Argentine households, particularly lower-income ones who rely on public services and price controls that got rolled back. Critics on the left, both inside Argentina and among international economists, have argued the human cost of rapid fiscal tightening is being undercounted in favor of headline stability numbers. Any shock-therapy program carries this trade-off, and it doesn't get erased just because bond markets like the results.

But the data Moody's is working from is difficult to argue with on its own terms. Fiscal surpluses are surpluses. Inflation coming down is inflation coming down. Reserve accumulation without currency instability is a genuinely difficult trick to pull off, and Argentina's central bank appears to be doing it.

The Catch: 2027

Moody's explicitly flagged political risk ahead of Argentina's 2027 general election as a factor still hanging over the outlook. The agency said it believes the range of likely policy outcomes has narrowed compared to previous election cycles. That signals Argentina looks less likely to swing back to the populist, high-spending policies previously associated with the country's elevated default risk and macroeconomic volatility.

Moody's said that narrower range increases the probability of policy continuity, which in turn supports sustained gains in external liquidity and debt payment capacity. The credit agencies are betting Milei's reforms have enough institutional and voter buy-in that whoever wins in 2027, wholesale reversal is less likely than it would have been a few years ago.

What Comes Next

A positive outlook from Moody's doesn't guarantee a further upgrade. It signals the agency sees a greater-than-even chance of one within the next 12 to 18 months if the current trajectory holds.

The real test will be whether Argentina can keep running fiscal surpluses through an election cycle without the spending promises that have derailed reform efforts in the past. Milei's coalition will need to hold its legislative position, and the central bank will need to keep adding reserves without letting the peso destabilize.

For now, two of the three major ratings agencies, Fitch in May and Moody's this week, are on record saying Argentina's turnaround is real. S&P Global Ratings has not been mentioned in this latest round of moves, and where it lands on Argentina's credit trajectory remains an open question worth watching heading into 2027.