A currency swap is an agreement between two parties—often central banks—to exchange currencies for a set period, with a promise to reverse the exchange later at an agreed rate. It's used to provide liquidity, stabilize exchange rates, or give a country access to foreign currency reserves without an outright sale.
The mechanics: A currency swap is an agreement between two central banks (or a central bank and a treasury) to exchange currencies for a set period, with a promise to reverse the trade later at an agreed rate. It gives one country access to another's currency without going through open markets — useful for defending an exchange rate, paying debts, or reassuring investors during a crisis. It's not a loan in the traditional sense, though it functions similarly.
The US-Argentina case, specifically:
On October 9, 2025, Treasury Secretary Scott Bessent finalized a $20 billion swap line with Argentina's central bank, part of a broader US package to prop up Milei's government amid market turmoil ahead of Argentina's legislative elections. The US directly purchased Argentine pesos and finalized the $20 billion swap line, a rare move aimed at stabilizing turbulent financial markets in the cash-strapped ally. Yahoo Finance
Trump initially conditioned the swap on Milei's party performing well in the upcoming election. Wikipedia
Only about $2.5 billion of the $20 billion was actually drawn. Wikipedia
By January 2026, Bessent said Argentina had fully repaid the swap, generating "tens of millions" in profit for American taxpayers. Wikipedia
Meanwhile, Argentina still has a separate, older swap line with China (unrelated to the US one) — worth roughly $18-19 billion — which it renewed in August 2026, extending the term from three to five years, despite US pressure to move away from Beijing's support.
So there are effectively two swaps in play: the now-repaid US line (a political/financial rescue) and the ongoing China line (a longer-standing reserves backstop Argentina has leaned on since 2009).