The International Monetary Fund (IMF) is reportedly considering a request from Argentina for the early payout of a $50bn (£38bn) loan, as the country’s economic crisis worsens.
The unexpected appeal from Argentine President Mauricio Macri follows “a collapse in investor confidence” in his government that sent the peso tumbling more than 7% yesterday, says RTE.
It was the biggest one-day decline in the peso since the currency was allowed to float in December 2015. The peso is down 45.3% against the dollar this year, prompting “massive central bank interventions”, the Dublin-based news site reports.
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Argentina’s economy has been battered by years of soaring inflation, with successive populist governments printing money to finance wide budget deficits, causing consumer prices to spike.
The run on the peso prompted the country to turn to the IMF for the $50bn credit line earlier this year. In return, Argentina’s government promised to speed up plans to reduce the fiscal deficit.
In June, the country received the first $15bn (£11.5bn) tranche of the payment from the IMF, with a further $3bn (£2.3bn) due in September, the Daily Express reports. But the Argentine government wants to revise this schedule in light of the growing need for emergency funds, although it is unclear how much money Macri is requesting.
In a statement on Wednesday, IMF managing director Christine Lagarde said that she’d had a “productive conversation” with Macri, and that IMF authorities would be “working to revise” Argentina’s economic recovery by implementing “stronger monetary and fiscal policies and a deepening of efforts to support the most vulnerable in society”.
“Economists had long argued that Argentina’s peso currency was overvalued, and the government acknowledged that it would depreciate gradually over the years,” Reuters reports. A widespread drought and failing crops have exacerbated the economic crisis.
However, “no one expected the speed with which the peso plunged against the dollar in April, due to investor concerns about the government’s ability to control inflation and interest rate hikes by the US Federal Reserve, which strengthened the dollar worldwide”.
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