Argentina Asks IMF Releases the Last Trance Loans Amid Crisis

G20 Ministers and Central Bank Governors meeting in Argentina - Photo by IMF

JAKARTA (TheInsiderStories)– The International Monetary Fund (IMF) and Argentina‘ government announced that it has agreed to accelerated loan disbursement of the rest of US$50 billion loan, the agency said on Thursday (30/08).

President Mauricio Macri made a request to expedite the disbursement of the bailout fund. The IMF flushed Argentina with $15 billion in the first tranche last June with plans to disburse the remainder if Argentina meets the target to reduce the fiscal deficit.

“President Macri and I had a productive conversation today. He indicated his desire to work toward strengthening the policies underpinning the Stand-By Arrangement with the IMF,” said the IMF Managing Director Christine Lagarde in a written statement.

Furthermore she added, “In consideration of the more adverse international market conditions, which had not been fully anticipated in the original program with Argentina, the authorities will be working to revise the government’s economic plan with a focus on better insulating Argentina from the recent shifts in global financial markets, including through stronger monetary and fiscal policies and a deepening of efforts to support the most vulnerable in society.”

Lagarde stressed IMF’ support for Argentina’ policy efforts and readiness to assist the government in developing its revised policy plans. “I have instructed IMF staff to work with the Argentine authorities to strengthen the Fund-supported arrangement and to reexamine the phasing of the financial program. I have agreed that we would aim to reach a rapid conclusion of these discussions to present to our Executive Board for approval,” said her.

She confident that the strong commitment and determination of the Argentina authorities will be critical in steering the country through the current difficult circumstances and will ultimately strengthen the economy for the benefit of all Argentines.

The announcement immediately sparked off fresh concerns that the Argentine government may default on its large debt which then sent the Argentina Peso crashing and forced its central bank to raise the benchmark rate to 60 percent from 45 percent.

On Thursday (30/08), the financial markets in emerging economies slid on renewed concerns over the spreading of the ongoing financial crisis in Argentina. The loan was initially intended only as a standby facility with the Argentine government assumed that its economy would recover which meant withdrawal might not be needed.

After seven consecutive days the Argentine Peso descended, President Macri on Wednesday (29/08), decided to make a rare speech to convince the market that Argentina had no difficulty paying its debts. The central bank is also moving quickly to restore peso power. The Central de la Republica Argentina Bank raised interest by 15 percentage points to 60 percent.

The Peso is the world’s worst performing exchange rate this year. Argentina is currently driving its country from recession and high inflation, ahead of the 2019 presidential election.

This announcement actually increased the alarm about Argentina’s ability to finance itself and encourage a decrease in the peso rate. Analysts and investors say the careless announcement is a series of communication failures and promises that have damaged the credibility of Argentine policymakers, destroying market confidence in the government’s ability to reverse an inflation-stricken economy.

Argentina switched to the IMF earlier this year after a weaker Peso made foreign currency debt more expensive to pay. The country still needs to raise $8 billion from the market in 2019 after the get the IMF’ loans.

The confusing message from the Argentine Government in everything, from tax increases, interest rates and central bank independence has damaged investor confidence in Macri.

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