Argentina has confirmed that its $20bn currency swap agreement with the United States can be deployed to cover foreign currency debt payments in 2026 if the country cannot secure refinancing in voluntary markets, as announced by President Javier Milei and Economy Minister Luis Caputo.

The confirmation triggered immediate market reactions, with dollar bonds and stocks rising earlier this week while exchange rates fell as the US Treasury began purchasing pesos, following Treasury Secretary Scott Bessent's intervention.

On October 9, Bessent confirmed the Treasury had “directly purchased Argentine pesos" and greenlighted a $20bn swap line with the South American nation, pointing out that his agency is “prepared, immediately, to take whatever exceptional measures are warranted” to safeguard what he previously called a "systemic ally" of the US.

Argentina faces foreign currency debt maturities of $18.18bn next year, comprising $9.68bn in principal and $8.498bn in interest, according to consulting firm Eco Go. Total payment obligations reach $29.64bn when including Central Bank bonds and provincial and corporate commitments, Infobae reported.

"In January, we have to pay $4.2bn in bonds. We may have refinancing, as is the case in most countries, or not at all, as is currently the case," Caputo explained to La Nación+. "If we didn't have it, we could request $4.2bn from the swap from the United States and thus guarantee payment."

Speaking to reporters, Milei emphasised the agreement's significance. "If the market doesn't cooperate, Argentina will have financing from the United States to reschedule its debt, which eliminates the spectre of default," the Argentine president said.

However, consulting firm Analytica warned that the government's financing goals remain challenging given elevated country risk. The 2025 Budget proposed $7bn in foreign currency debt placement and $5bn in BONTE bonds, though the latter's issuance was suspended due to rising rates.

This unprecedented US financial support comes ahead of Milei’s trip to the US, where he is set to meet with President Donald Trump on October 14. It also represents a major diplomatic victory for the libertarian leader ahead of Argentina's high-stakes October 28 midterm elections, potentially stabilising markets and bolstering his political standing after last month's stinging defeat in Buenos Aires provincial polls.