Argentina has clinched $42bn in medium-term funding from the International Monetary Fund (IMF) and two other financial institutions as it announced it is abandoning most of its tight currency controls.

The IMF’s executive board late on Friday approved a $20bn bailout package that will be doled out over the next four years, with an immediate disbursement of $12bn and another $2bn available after a review planned for June.

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The World Bank also announced a $12bn support package for Argentina, and the Inter-American Development Bank (IDB) said it will provide up to $10bn in financing for the public and private sectors. Both are three-year plans.

President Javier Milei announced on Friday that he will – starting on Monday – lift most of Argentina’s strict capital and currency controls as part of agreements that secured the huge funding deals.

“Today we are breaking the cycle of disillusionment and disenchantment and are beginning to move forward for the first time,” he said on national television while flanked by his ministers. “We have eliminated the exchange rate controls on the Argentine economy for good.”

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The capital controls, known in Argentina as “el cepo” or “the clamp”, were imposed by a previous administration in 2019 with the aim of preventing further financial downfall and capital flight that the country has been dealing with for years.

The controls clamped down on individuals’ ability to buy US dollars, giving rise to a black market that is widely used by citizens. They also restricted companies’ access to dollars, discouraging foreign investment that Milei needs.

The Argentinian central bank now aims to allow the peso to trade within a so-called currency band instead of firmly pegging the beleaguered currency to the dollar.

The band ranges from 1,000 to 1,400 pesos per greenback and will expand by 1 percent each month, according to the central bank.

In announcing its latest support package, the IMF said the programme is “expected to catalyse further official financing from multilateral sources” and “seeks to facilitate a timely return to international capital markets”.

“The program supports a path toward entrenching macroeconomic stability, strengthening external sustainability, and laying the foundation for stronger and more resilient growth,” it said, adding that its key pillars include “maintaining a strong fiscal anchor, transitioning towards a more robust monetary and FX regime”.

The organisation praised Argentinian authorities’ new commitment to a zero-deficit budget target, which has delivered the first fiscal surplus in almost two decades.

But to achieve the surplus, Milei has fired tens of thousands of state workers, with his overhauls hitting the population hard, including by raising poverty levels.

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