Sunday, 17 February, 2019


International Monetary Fund agrees to $71 billion deal to help Argentina's economy

Argentina's Treasury Minister Dujovne and Argentina's Central Bank President Sturzenegger attend a news conference in Buenos Aires International Monetary Fund agrees to $71 billion deal to help Argentina's economy
Conrad Doyle | 10 June, 2018, 22:13

Furthermore, the International Monetary Fund said it "endorsed" the Central Bank of Argentina's (BCRA) decision to adopt "meaningful" inflation targets and a flexible market-determined exchange rate.

The government said it wanted the arrangement as a safety net to avoid the frequent economic crises that have struck the country in recent years.

But turning to the International Monetary Fund has brought back bad memories for Argentines who blame the policies of the lending institution for the country's worst economic crisis in 2001.

Alejandro Werner, director of the IMF's Western Hemisphere Department, and Roberto Cardarelli, mission chief for Argentina, are expected to address a press conference in Washington later on today.

"That way, society does not have to choose between building a bridge or protecting the poorest".

Terms of the arrangement include the goals of reducing the Argentine government's budget deficit by 2020 and of bringing down inflation to 17% by 2019, 13% by 2020 and 9% by 2021, Mr Dujovne said. We are also encouraged by the authorities' commitment to ensure legal independence and operational autonomy for the central bank and to immediately put an end to central bank financing of the federal deficit.

It is on record that Macri was elected in 2015 on a promise to make Argentina a "normal country" again.

"Argentines do not want to go back to the past".

"We are going to have increased inflation", Dujovne acknowledged.

During the week, the leading Merval index rose 10.5% while the peso lost 2.3%. Bonds rose modestly, with Argentina's country risk 11EMJ - a J.P. Morgan measure of the difference between the country's bond yields and less risky alternatives - down five points at 476 as of 3:56 p.m. local time (1746 GMT). The request for assistance from Argentina was lodged on the 8th of May this year. President Mauricio Macri's turn to the lender has led to protests in the country.

The deal still needs to be approved by the IMF's Executive Board; that is expected to happen later this month.

"The amount we received is 11 times Argentina's quota, which reflects the global community´s support of Argentina", treasury minister Nicolas Dujovne said in Buenos Aires.

The exchange rate closed at 25.98 pesos per dollar after the central bank announced it would let the currency float, removing the 25 pesos per dollar ceiling it had set. The peso fell 25 percent against the dollar this year to trade at 24.9850 on Thursday.

The government has been negotiating with the worldwide lending agency to alleviate the currency devaluation in the country for the past few weeks.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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