Argentina burns reserves, asks for early International Monetary Fund help as peso crashes

Argentina burns reserves, asks for early International Monetary Fund help as peso crashes

The Argentine peso tumbled again, even after the central bank hiked its benchmark interest rate by 15 percentage points to a dizzying 60 percent on Thursday in a bid to control rampant inflation and stem the currency's slide.

The Argentine currency fell again Wednesday to close at an all-time low of 34.2 pesos per USA dollar.

The Argentine peso has lost more than 40% of its value against the United States dollar this year and inflation is rampant.

"Regardless of what happens from here, the country's weak balance sheets mean that Argentine markets will remain extremely vulnerable to swings in investor risk appetite", added Glossop.

On Wednesday, the embattled country's president Mauricio Macri urged the International Monetary Fund to speed up the issuance of a $50bn bailout package. Macri's call to the International Monetary Fund is specifically to try and stem the slide of investor confidence, "This decision aims to eliminate any uncertainty", he added.

Macri said that in the past week there have been "expressions of a lack of trust in the markets" about Argentina.

In December 2015, at the start of his presidency, the Macri government made the crucial mistake of lifting all exchange controls before stabilizing Argentina's economy and before aggressively embracing deep economic reform. She said the "more adverse global market conditions" had not been "fully anticipated" when the IMF and Argentina reached the deal.

But the June deal has been slow to calm nerves about the country with an inflation rate of almost 30%, soaring twin deficits, and a currency crisis.

Macri's government has committed to reducing its budget deficit to 2.7 per cent this year, from 3.9 per cent in 2017, and to 1.3 per cent of GDP next year in return for International Monetary Fund support.

United States suspends $300 million in military aid to Pakistan
But U.S. officials had held out the possibility that Pakistan could win back that support if it changed its behavior. The proposed cuts mark a new low in what were already deteriorating relations with the United States' longtime ally.

Everyday life is getting more expensive for Argentines, as the prices of many goods and services still bear a close relation to the USA dollar.

In response, the central bank has hiked interest rates to 45% and sold more than $13 billion in reserves, including $300 million in an auction on Wednesday.

Argentina is struggling to deal with but one other financial crisis.

Elected in 2015 on a pledge to end Argentina's repeated cycles of crises, Macri said his orthodox policies would set the stage for sustainable growth.

The peso's decline has contributed to a jump in inflation, which hit a 12-month rate of 31.2% in July.

Part of the $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.

Argentina's biggest labor group, the CGT, said on Wednesday it will call a 24-hour general strike on September 25 to protest Macri's belt-tightening measures.

When the terms of the loan were agreed in May, President Macri said he expected the economy to recover and did not plan to use the money.

"I know that these tumultuous situations generate anxiety among many of you", Mr. Macri said.

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