Argentina asks IMF to release $50bn loan as crisis worsens
The decision to speed up the IMF bailout smacks of growing desperationEuropost
Argentina’s President Mauricio Macri has asked the International Monetary Fund for an early release of funds from a $50bn deal to ease concerns that the country will not be able to meet its debt obligations for 2019. Later that day he announced that the IMF has agreed to accelerate funding in support of his government's austerity program.
“I am confident that the strong commitment and determination of the Argentine authorities will be critical in steering Argentina through the current difficult circumstances and will ultimately strengthen the economy for the benefit of all Argentines,” the IMF’s Managing Director Christine Lagarde said in a statement.
Argentina was forced to strike a deal with the IMF earlier this year after a sharp depreciation of its currency and a run on the peso. The three-year standby financing deal is aimed at strengthening its weak economy and helping it fight inflation, which is currently one of the highest rates in the world.
On Wednesay Macri called for the early release of the funds in a phone call with Lagarde amid heightened volatility in Argentina's financial and currency markets, which have been battered by uncertainty over inflation, an economic downturn and budget deficits. The Argentine peso has lost more than 40 percent of its value against the dollar this year and it continued its decline Wednesday, plummeting 6.99 percent through the day to fall to 34.48 to the dollar by the close. Moreover, Inflation is projected to surpass 30 percent by the end of 2018.
Macri had sought to soothe the turbulence in a statement before markets opened, assuring Argentines that help is 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," Macri acknowledged, adding the IMF would provide "all the funds necessary to guarantee the fulfillment of the financial program next year."
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. The first $15 billion tranche has already been released.
In return for an accelerated loan payment, the government has committed to reducing its budget deficit to 2.7 percent this year, from 3.9 percent in 2017, and to 1.3 percent of GDP next year.