Argentina is in talks with several allied governments about bilateral loans as Buenos Aires seeks cheaper alternatives to international bond markets ahead of a $4.2bn payment to private creditors due on July 9, according to officials familiar with the discussions cited by La Nacion.

Economy Minister Luis Caputo is assessing government-to-government financing that could provide funds on more favourable terms than a bond sale abroad. Talks have taken place with the United States, Israel and Italy – three countries that have cultivated closer political ties with President Javier Milei since he took office in late 2023 – and are being conducted across Argentina's Treasury, foreign ministry and central bank, according to local media reports.

The approach is consistent with a strategy Caputo has articulated publicly since at least February, when he told Radio Mitre that the government had "no intention" of issuing bonds abroad this year. The minister has argued that Argentina's country risk, currently well above 500 basis points despite falling below that threshold earlier this year for the first time since 2018, does not yet reflect the progress made under Milei's flagship economic programme, making a return to global capital markets premature and unnecessarily costly.

Argentina had explored a bond sale in New York with international banks, but market estimates suggested the country would need to offer yields above 9.5% on a 10-year bond. The government ultimately shelved the operation on cost grounds.

Officials have also pointed to broader geopolitical factors, with market participants noting that tensions in the Middle East, in particular the conflict involving Iran, have increased investor caution towards emerging markets, further complicating the timing of any potential issuance.

Washington's support has been a key pillar of Argentina's financing strategy. A new $20bn programme with the International Monetary Fund, finalised in April last year, was backed by the US Treasury, which also authorised a swap line of up to $20bn with the Argentine central bank, of which $2.5bn was activated before last October’s midterm elections. Buenos Aires has held up those gestures as evidence of the geopolitical dividend from Milei's close alignment with the Trump administration.

The government has also demonstrated an ability to meet large external obligations through alternative means. Earlier this year, Argentina paid a $4.2bn instalment to private bondholders using a combination of internal resources and a repo transaction in which the central bank used dollar-denominated bonds as collateral, raising $3bn at an interest rate of around 7.4%. The central bank has also accumulated roughly $3bn through foreign exchange market purchases this year, with officials indicating those reserves, along with expected proceeds from planned privatisations, could help cover forthcoming maturities.

The July payment is one instalment in a much larger financing challenge. According to consultancy GMA Capital, Argentina faces approximately $30bn in debt maturities between 2026 and 2027, including obligations to private bondholders and the IMF net of expected disbursements. Separately, consultancy Invecq had estimated earlier this year that the country needed to meet around $18bn in dollar-denominated debt maturities over the remainder of 2025.

Analysts at Citi, JPMorgan, Morgan Stanley, Barclays, Wells Fargo and Bank of America have credited Argentina with meaningful progress under Milei, particularly in reducing inflation and restoring fiscal balance — the government swung from a primary deficit of 2.3% of GDP in 2023 to a surplus of 1.8% in 2024. But they warn that low foreign reserves and the need to normalise the exchange rate regime leave the country exposed to external shocks.

Caputo has argued that the government's deliberate avoidance of sovereign bond issuance is itself a structural reform, echoing a theme he outlined in February. He noted that Argentina had historically run fiscal deficits for most of its modern history, causing the state to crowd out private and provincial borrowers. Since the government began repaying debt without rolling it over into new sovereign issuance, companies and provincial governments have rushed to fill the gap: since last October's midterm elections, which delivered a resounding win to Milei’s right-wing coalition, subnational and corporate bond placements have reached $9.3bn, including $800mn deals by Córdoba and Santa Fe and a $600mn issuance by the city of Buenos Aires.

Whether bilateral loans can bridge the gap between Argentina's financing needs and its reluctance to pay market rates remains the central question facing Caputo's economic team as the July deadline approaches.