How did Argentina use the dollars from the swap operationally — reserve builds, FX market intervention, or debt servicing?
Executive summary
Argentina drew about $2.5 billion from a $20 billion U.S. Exchange Stabilization Fund (ESF) swap line and used those dollars mainly as short-term liquidity to cover imminent external obligations and to reassure markets — a mix of debt servicing and reserve/FX-market management rather than a long-term reserve buildup — and then repaid the drawdown within weeks using other dollar sources, according to public reporting [1] [2] [3].
1. The size and nature of the draw — a short, targeted withdrawal
The operation was small relative to the $20 billion facility: Argentina drew roughly $2.5 billion, a limited use intended as an emergency backstop rather than a full capital infusion, and Washington emphasized it was temporary and fully repaid shortly after [1] [2] [4].
2. Debt servicing was the clearest, documented operational use
Multiple outlets reported that the dollars were used to meet pressing external obligations and to make “key payments to bondholders,” and Argentine officials and analysts signalled that debt servicing was a primary use — including covering maturities and avoiding missed payments when access to private dollar markets was strained [1] [5] [6]. Buenos Aires’ own commentary and reporting indicated the swap was explicitly envisaged as an instrument that could be tapped to make 2026 debt payments if market access froze [5].
3. FX-market stabilization and reserve management were complementary objectives
The swap line was framed from the outset as a tool to support the peso and calm devaluation fears: U.S. officials and Argentine authorities stressed the arrangement’s role in propping up the currency and providing a safety net for foreign-exchange markets [7] [8]. Independent reporting and central‑bank commentary also noted routine dollar purchases and reserve accumulation policies around the same period — the authorities signalled they would buy dollars “most days” to normalize reserve levels under a new banded exchange-rate regime [9] [10]. That suggests the swap’s existence reduced tail‑risk in the FX market even if the actual drawn dollars were routed to immediate obligations.
4. Repayment came from other dollar sources, not from a permanent conversion into reserves
Reporting shows Argentina repaid the U.S. drawdown rapidly, with the central bank saying settlement was completed in December and the Treasury and other sources noting repayment in January — and some journalists and officials reporting that multilateral loans or other dollar liquidity were used to effect the repayment rather than simply replenishing reserves with the ESF funds [7] [2] [11]. LatinFinance and UPI cited that multilateral financing and privatization proceeds were mobilized to meet bond maturities and to settle the swap obligation [11] [3], indicating the swap functioned as bridge financing rather than a structural reserve rebuild.
5. Conflicting narratives and incentives: market reassurance vs. political signaling
Washington framed the transaction as a successful stabilizing operation that even generated “tens of millions” in profit for the U.S. Treasury, while critics in the U.S. called it an extraordinary use of ESF resources and a politically-timed intervention ahead of elections [3] [7]. Argentine commentary was mixed: Milei’s team stressed that the swap was insurance to avoid disorderly market moves and to pay debt if market access froze [5], while domestic economists parsing central bank flows concluded that part of the facility had been used to pay external obligations [12]. Some reporting also suggests Argentina only tapped the line because other dollar sources had temporarily dried up, underscoring a liquidity rather than solvency motive [2] [10].
6. Bottom line: operationally, it was bridge liquidity and market backstop, not a reserve makeover
Taken together, the evidence in public reporting points to the drawdown being used operationally to pay external obligations and shore up confidence in FX markets — fulfilling debt‑servicing and short‑term liquidity roles — while the broader policy aim of building durable reserves and calming the peso relied on a mix of market dollar purchases, privatization receipts and multilateral financing rather than a permanent conversion of the ESF swap into reserves [1] [9] [11] [2]. Public sources do not provide a full transaction-level ledger, so precise intraday flows and the sequencing between FX intervention and debt payments remain partially opaque in available reporting [8].