BUENOS AIRES: Argentine President Mauricio Macri’s government will continue discussions with the International Monetary Fund this week as efforts to stave off an economic crisis multiply.
It will be a crucial week for Macri and his government after a turbulent few months in which the currency has been badly hit by a crisis of confidence, while public protests have increased in regularity and fervor, reports AFP.“Argentina will start again, but there is a transition to navigate,” Macri admitted on Friday.
The peso was starting to recover at the end of last week after a dramatic two days of crashes the week before.
Having lost 20 percent against the dollar over two days a week earlier, it regained 5.35 percent from Wednesday to Friday to close at 37.77.
But that still represents a loss of around half its value since the start of 2018.
Panicking Argentines, who view the dollar as a safety net for their savings, have withdrawn $500 million from the banking sector since April.
According to official estimates, they are holding $300 billion outside of their country’s financial circuit, either in cash or abroad, mostly in Uruguay and the US.The micro-recovery has been helped by positive noises coming out of Washington, where Finance Minister Nicolas Dujovne met with IMF head Christine Lagarde last week.
But Macri says the public is right to remain worried.
“All the structural issues have not been resolved because we had three days of calm,” said the president.
“Hopefully the calm will continue, because we don’t know if another storm is coming.”
Argentina’s currency troubles led the government to approach the IMF and secure a $50 billion loan, with an initial $15 billion tranche of that handed over in June, in large part to prop up the peso.
Although it briefly calmed the storm, market confidence waned again, in part due to the impact of the crisis in Turkey on the currencies of emerging countries.
Argentina went back to the IMF and asked for an advance on loan payments due in 2020 and 2021, but the announcement it was doing so hurt the peso again.
In a desperate bid to steady turbulent waters, Argentina’s Central Bank hiked interest rates to a world-high 60 percent until at least the end of the year.
But with inflation expected to reach 40 percent for 2018 and Argentines feeling the pinch from rising prices their meagre salaries are ill-equipped to cope with, fear and discontent are on the rise.
Macri introduced austerity measures, but those proved unpopular with citizens — protests have become a daily occurrence — while also failing to appease nervous investors.
Some protesters have been chanting for the government to stop paying its debt, while Macri’s popularity has been falling.
In return for accelerated IMF funding, Argentina has pledged to eliminate its primary budget deficit in 2019. It was 3.9 percent of GDP in 2017.
Any advance of loans would have to be approved by the IMF Executive Board, which doesn’t meet until the second half of September.
Argentina has had to admit that the economy is in a worse state than previously hoped.