Argentina's government, under President Milei, is betting on bank credit to fuel its economic recovery, aiming to replicate a consumer lending boom seen in late 2024 and much of 2025. This strategy is complicated by a significant rise in private-sector credit, which has climbed from approximately 5% of the economy when Milei took office to about 16%. However, this surge has stalled due to a high volume of uncollectible debt, with overall private-sector delinquency estimated to have peaked near 8% in June, up from 7.2% in May.
Household loan delinquency reached a record 12.7% in May, representing roughly 5.8 million people behind on their payments. For non-financial institutions, including fintechs, this figure is even higher at 32.2%. In contrast, only 2.5% of household loans were in default at the end of 2024, highlighting a drastic increase. The most affected loan categories are personal loans and credit cards, which carry annual rates near 65% to 85%, far above the sub-30% inflation. This situation is attributed to stagnant wages, rising informality, and banks becoming more cautious in their lending practices.
Despite the challenges, the Central Bank has tried to alleviate pressure by loosening monetary policy in April, pushing rates down towards 20% even with 32% inflation, and relaxing reserve requirements. However, President Milei has refused calls from Wall Street banks to further loosen monetary policy, prioritizing inflation control over a faster, credit-driven rebound. Delinquency rates among businesses also rose, albeit at a lower scale, from 3.3% in April to 3.5% in May, contributing to the overall private sector delinquency rise from 7.3% to 7.7%. Consulting firm 1816's data, based on official figures, indicates that nearly 40% of delinquent borrowers are under 35, highlighting a long-term concern for their financial futures.
