Fitch Ratings upgraded Argentina's long-term sovereign credit rating on May 5, lifting it one notch to 'B-' from 'CCC+' with a stable outlook, marking the country's first such upgrade in eight years and reflecting what the agency described as structural improvements in the fiscal and external position under President Javier Milei.

The upgrade restores Argentina to a level it has not held since the 2018 currency crisis that derailed the administration of Mauricio Macri and ultimately led to the country's 2020 default, leaving it just one step below the 'B' rating it briefly attained in 2016. The rating remains firmly in speculative territory, however, and well below the 'BBB-' assigned to Mexico and the 'BB' held by Brazil. Peers Moody's and Standard & Poor's, which typically carry greater sway with international investors, have yet to follow suit.

Fitch cited progress on economic reforms, stronger prospects for foreign exchange reserve accumulation, and confidence that Buenos Aires will secure adequate financing to meet its debt obligations.

Argentina's improved external position featured prominently in Fitch's rationale. The country recorded a record first-quarter trade surplus of $5.5bn, up from $1.1bn a year earlier, driven by its emergence as a net energy exporter, underscoring its resilience amid the ongoing oil price surge triggered by the conflict in the Middle East. Fitch now forecasts a current account deficit of just 1% of GDP this year, well below the 3.7% median for countries with similar ratings, and cited a strong pipeline of energy and mining projects under the government's flagship RIGI large investment framework as a medium-term support for foreign direct investment.

The agency also highlighted what it termed the administration's legislative victories, including the passage of a labour reform bill and amendments to the National Glaciers Law easing environmental restrictions on mining, both seen as pillars of Milei's broader deregulation agenda.

On the fiscal front, Fitch said a balanced budget remained the government's key policy anchor, projecting a primary surplus of 1.1% of GDP in 2026, narrowing slightly from 1.4% the previous year. Argentina's general government deficit, it added, was expected to rank among the lowest in the 'B' category globally.

Reserve accumulation has also gathered pace. The government has purchased $7.1bn in dollars through April and is targeting between $10bn and $17bn in foreign exchange purchases for the full year, a push that helped secure IMF agreement on the second review of its Extended Fund Facility programme. Gross reserves are expected to reach $52.7bn by year-end, though net reserves — once short-term foreign currency liabilities are stripped out — remain thin.

Fitch also described a new financing strategy assembled by the economic team to cover upcoming hard-currency bond maturities: a package comprising at least $2.5bn in multilateral guarantees, at least $4bn in dollar-denominated domestic bond issuance, and $2bn in privatisation proceeds. The government has so far avoided tapping external markets directly, forgoing that option to sidestep higher borrowing costs, though Fitch noted this limits its ability to build a larger liquidity buffer ahead of next year's election cycle.

The agency was candid about the constraints on the rating. Argentina's international liquidity position "remains weak to manage potential confidence shocks, to which Argentina has been particularly vulnerable," it said, pointing also to persistently high inflation and the country's history of macroeconomic instability. Monthly inflation fell as low as 1.5% in May 2025 but rebounded to 3.4% in March 2026 on the back of exchange rate pass-through, utility price adjustments and a global energy price spike. Fitch expects it to fall back below 2% per month by year-end.

Growth, meanwhile, has been uneven. Activity has been concentrated in extractive industries, agriculture and financial services, while construction and manufacturing have stagnated or contracted, weighing on formal employment and consumer confidence. Fitch projects GDP growth of 3.2% in 2026, down from 4.4% last year, but noted this would mark the first back-to-back years of expansion since 2011 excluding the post-pandemic rebound.

Looking further ahead, Fitch flagged presidential and legislative elections scheduled for October 2027 as a source of uncertainty. Despite a fragmented opposition, the agency warned that sluggish growth and stubborn inflation were weighing on the libertarian administration's approval ratings, and that financial markets remained sensitive to political developments, as demonstrated by volatility ahead of last year's midterms.

The upgrade had a modest positive effect on markets, with Argentina's country risk spread dipping from around 558 to the 550-point range on the day.

"It is a logical decision, given that the statement emphasises improvements in fiscal and external balance, with progress in economic reforms and strong purchases of reserves that increase expectations that the government will be able to meet its financial obligations," said Juan José Vazquez, head of research at Cohen Aliados Financieros, according to La Nacion.

The City of Buenos Aires is expected to move quickly to capitalise on the improved sentiment, seeking to raise up to $500mn through a ten-year global bond.