BUENOS AIRES, Argentina (AP) — The libertarian government of President Javier Milei on Friday announced that it would lift most of the country’s strict capital and currency controls next week, a high-stakes gamble made possible by a new loan from the International Monetary Fund. It marked a major step forward in Milei's program to normalize the economy after decades of unbridled spending.

In a nationally televised address, Economy Minister Luis Caputo said the IMF’s executive board had decided to approve the $20 billion bailout package announced earlier this week, which offers a lifeline to Argentina’s dangerously depleting foreign currency reserves.

“The agreement will allow us, starting Monday, to lift the exchange rate controls that so severely limit the normal functioning of the economy,” Caputo said from the government headquarters in Buenos Aires. “Investments that are currently pending will begin to come into Argentina to take us to this new stage.”

The capital controls, known here as “el cepo,” or “the trap, ” are a tangle of regulations that help to stabilize the peso at an official rate and prevent capital flight from Argentina.

Imposed by a previous administration in 2019, the restrictions curb individuals’ and companies’ access to dollars, discouraging the foreign investment that Milei needs to achieve his goal of transforming heavily regulated Argentina into a free economy.

The restrictions made it almost impossible for ordinary Argentines to purchase dollars, giving rise to a black market that is technically illegal but that almost every Argentine uses to sell their depreciating, inflation-prone pesos anyway.

Caputo said the central bank would receive $12 billion from the IMF on Tuesday — a bigger-than-expected upfront sum that gives Argentina's reserves breathing room to make the major change and reflects the fund's confidence in Milei's radical reforms.

“The Fund told us that what we’d done was practically impossible,” Caputo said.

The new policy also involves cutting the Argentine peso free from its peg to the dollar. But instead of a risky free float, Argentina is allowing the peso to trade within a so-called currency band that ranges from 1,000 to 1,400 pesos per dollar. The band will expand 1% each month, the bank said.

This breaks from Milei's current policy of letting the peso weaken at a pace of 1% against the dollar each month.

That crawling peg drew backlash from investors worried about the central bank burning through its reserves to prop up the peso, with the central bank forced to spend $2.5 billion to defend the official exchange rate in just the past few weeks.

When announcing the removal of exchange controls Caputo insisted it was “not a devaluation.”

Milei’s team has sought to fend off a politically costly official devaluation of the peso that could push inflation much higher. Keeping a lid on rising prices — a flagship campaign promise — has helped the political outsider hold up approval ratings despite his brutal cuts to state spending that might otherwise trigger social unrest.

But it was clear that the peso would have to depreciate, with economists guessing that it would fall to close to its black-market rate. On Friday, it was 1,375 pesos to the dollar, compared with the official exchange rate of 1,097 pesos.

Marcelo J. García, director for the Americas at New York-based geopolitical risk consultancy Horizon Engage, said he expected an initial devaluation of around 20-25%.

“A big question mark is inflation in the second quarter of the year. It’s very likely there will be a shock,” said Leonardo Piazza, chief economist at Argentine consulting firm LP Consulting.

The announcement came as the IMF’s executive board was preparing to approve the new 48-month, $20 billion loan program with Argentina, the 23rd rescue package in the nation's long and tumultuous history. The South American nation is already the IMF's biggest debtor, owing some $43 billion.

After the unusually large first $12 billion disbursement from the IMF hits Argentina's central bank Tuesday, another $2 billion will arrive in the next two months, the government said. International organizations like the World Bank will contribute several billion more dollars as part of the deal. The Inter-American Development Bank announced $10 billion later Friday, disbursed over the next three years.

Before Milei took office in December 2023, the previous left-wing Peronist administration ran up massive budget deficits, leading to sky-high inflation and a chronically weakening peso.

By scrapping subsidies and price controls, firing tens of thousands of state workers and halting the central bank's overreliance on printing pesos to pay the government’s bills, Milei has delivered Argentina's first fiscal surplus in years and largely stabilized its macroeconomic imbalances, thrilling markets even as his shock-therapy approach has hit the population hard.

Yet for all the changes and the financial pain, there have been scant signs of a sustainable recovery. Analysts say that a long-term economic revival involves the removal of capital controls, the amassing of currency reserves and access to international capital markets.

As a result foreign companies — wary of pouring their cash into a country infamous for defaulting on its debt — have waited remained on the sidelines despite Milei's new tax breaks and other perks for investors.

Milei has rejected pressure from investors over the past year to lift the capital controls, insisting that the economic conditions needed to be right. It's a high-risk mission, as scrapping the “cepo” could unleash years of pent-up demand for U.S. dollars and spark a currency run as companies try to send their long-trapped profits home.

“It could be a tsunami of money out,” said Christopher Ecclestone, a strategist with investment bank Hallgarten & Company. “It’s a total guessing game as to what people will do.”

The government said that while it was lifting restrictions for the public, it would retain taxes on card purchases abroad and some regulations on companies. For instance, from 2025 on, multinational firms will be able to repatriate their earnings. But to take out their holdings already trapped in the country, they'll need to exchange the debt for dollar-denominated security bonds.

It's an effort to insure against capital flight, which would imperil Milei's primary accomplishment of lowering inflation ahead of midterm elections in October that are crucial for his libertarian party to expand its small congressional minority.

“The announcement is more audacious than expected. The government is making a bit of a leap of faith by lifting the cepo,” said García. “It is bolder than one could have imagined at the start of an electoral year.”

It's also bold timing, analysts say, considering the local market turmoil sparked by U.S. President Donald Trump’s tariffs. In recent days, Argentine stocks and bonds have plunged.

Meanwhile, with traders nervous about a possible peso devaluation under Argentina's IMF deal, the closely watched gap between Argentina's currency exchange rates grew by over 20%. The gap is a key indicator of confidence in the government and can fuel inflation, which already accelerated in March to its fastest pace in seven months.

On Friday, Argentina’s National Statistics Institute reported that consumer prices ticked up 3.7% last month compared to 2.4% in February, mainly as a result of rising food prices.

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Associated Press writer Almudena Calatrava contributed to this report.