Milei Bets on a Bank Credit Revival to Power Argentina’s Rebound

Markets

Key Facts

—The bet. The government hopes a new expansion of bank credit will spark a broad recovery in spending and activity.

—The snag. Household loan delinquency hit a record 12.7% in May, meaning about 5.8 million people are behind on debt.

—The cost. Rates on personal loans and cards still run near 65% to 85% a year, against expected inflation below 30%.

—The young. Nearly 40% of all delinquent borrowers are under 35, one study found, a lasting mark on their credit.

—The standoff. Wall Street banks want looser monetary policy to lift activity; President Milei has said no before the vote.

Argentina’s government is counting on a fresh wave of bank credit to drive its recovery. But record defaults and still-weak wages have left the market unconvinced the plan will work soon.

Energy, mining and farming remain the main motors of the economy. Alongside them, the economic team hopes cheaper, wider lending will finally spread the recovery to ordinary households.

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Why the government is betting on bank credit

The idea is to repeat the consumer-lending boom that took off in late 2024 and ran through much of 2025. That surge stalled after a bungled unwinding of a short-term debt instrument and pre-election nerves.

Deputy Economy Minister José Luis Daza recently said the government was working on “many alternatives” to revive lending, as reported by the Buenos Aires Herald. State-owned Banco Nación has been pushing financing plans of its own.

There has been real progress to build on. Private-sector credit has climbed from around 5% of the economy when Milei took office to roughly 16%, as banks shifted from holding government paper back to lending.

Why the market is skeptical

The obstacle is debt that is not being repaid. A study by the consultancy 1816 put household loan delinquency at a record 12.7% in May, roughly 5.8 million people behind on what they owe.

Overall private-sector delinquency is thought to have peaked near 8% in June, up from 7.2% in May. Bank projections seen by the Herald expect it to ease only gradually, to around 6.3% to 6.5% by December.

Rates remain punishing. Personal loans and credit cards, about half of all peso lending, carry annual rates near 65% to 85%, far above the sub-30% inflation now expected.

Wary of the defaults, banks have tightened who they lend to. Former central bank director Jorge Carrera told the Herald the strain owes more to falling activity and incomes than to interest rates alone.

A generation marked early

One finding stands out for the long term. According to 1816, nearly 40% of all delinquent borrowers are under the age of 35, at the very start of their financial lives.

A missed-payment record is hard to shake, and lenders grow reluctant to extend fresh credit to those who carry it. That threatens to blunt exactly the spending revival the government is chasing.

The monetary standoff

There is a policy tug-of-war behind all this. Several Wall Street banks have urged the government to loosen monetary policy to lift activity before the elections; Milei has flatly refused.

For a foreign reader, that is the tension in one line. The president is protecting his hard-won drop in inflation, even at the price of a slower rebound that a credit surge alone may not fix.

Why is Argentina betting on bank credit?

The government hopes a renewed expansion of lending will spread its recovery from exports to households, repeating a consumer-credit boom that ran through much of 2025 before stalling. Officials say they are working on “many alternatives” to revive it.

Why is the market skeptical?

Household loan delinquency hit a record 12.7% in May, about 5.8 million people, and lending rates remain near 65% to 85% a year. Weak wages, rising informality and cautious banks all work against a quick rebound in credit.

What does Milei refuse to do?

Several Wall Street banks have pressed the government to loosen monetary policy to speed the recovery before elections. Milei has refused, prioritising his hard-won fall in inflation over faster short-term growth.