ARGENTINA: IMF TO SPEED UP LOAN DISBURSEMENT
But Macri’s comments fail to calm market as country’s currency comes under renewed pressure
ARGENTINA’S President Mauricio Macri said yesterday the International Monetary Fund (IMF) has agreed to accelerate funding in support of his government’s austerity programme, but his comments did little to calm the market as the country’s currency came under renewed pressure.
The development came amid heightened volatility in Argentina’s financial and currency markets,
which have been battered by uncertainty over inflation, an economic downturn and budget deficits.
Macri sought to soothe the turbulence in a statement before markets opened, assuring Argentines that help was on the way.
“Over the past week, we have had new expressions of lack of confidence in the markets, especially over our ability to obtain financing for 2019.”
He said the IMF would provide “all the funds necessary to guarantee the fulfilment of the financial
programme next year”.
That would involve accelerating the disbursement of a US$50 billion (RM205.5 billion) standby loan that the IMF agreed to extend to Argentina in June following a run on the peso.
In return, the government has committed to reducing its budget deficit to 2.7 per cent this year, from 3.9 per cent last year, and to 1.3 per cent of gross domestic product next year.
But the peso continued its decline after the announcement, plummeting 6.99 per cent through Wednesday to fall to 34.48 to the US dollar by the close.
“The announcement was vague and was made by the president, which has its risks,” said analyst Lorenzo Sigaut of consultants
Ecolatina, who said it would have been more convincing if announcement was made by the economy minister.
He said overall doubts of an Argentine default on the loan had been assuaged “only until Macri’s term ends (in December next year) but as of 2020, they remain latent.”
“The dollarisation of assets is fuelled internally by Argentine’s distrust of the peso, because the government has promised much on the economy but hasn’t delivered,” said Sigaut.
Part of the US$50 billion loan is to be allocated to support the budget, and the rest to the country’s central bank to shore up the peso over a three-year period.