Argentina hikes interest rate to 60%; Peso plunges

Argentina hikes interest rate to 60%; Peso plunges

Argentina's peso buckled on Wednesday, setting a record low of 34.10 per US dollar after the central bank sold reserves for a second straight day and the president asked the International Monetary Fund for early release of standby funds.

Argentina's President Mauricio Macri said Wednesday that the International Monetary Fund has agreed to accelerate funding in support of his government's austerity program, but his comments did little to calm the market as the country's currency came under renewed pressure.

The Argentine peso is still losing value despite all attempts to meet investor concerns.

Al Jazeera's Paul Chaderjian reports.

Argentina has US$ 24.9 billion in peso- and foreign currency-denominated debt payments due next year, according to official data. The last recent one, which was punctuated by a 2002 debt default, tossed millions of middle-class Argentines into poverty. Macri did not say how much he had requested from the Fund. IMF economists and technicians are in Argentina this week in meetings with government members to review portions of the agreement.

A senior Argentine Treasury Ministry official, who asked not to be identified, said Macri had spoken to leaders of the main International Monetary Fund shareholding countries on Tuesday before making his address and had clinched a "political agreement" to bring forward disbursements. He said the decision sought to dispel any uncertainty, but he did not specify the amount or when the funds would be released.

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Investors were looking on Friday for hints of a fiscal package the Argentine government said it would announce next week after dramatic drops in the peso currency, while the opposition called for protests as discontent with President Mauricio Macri grows.

A man shows Argentine pesos outside a bank in Buenos Aires' financial district, Argentina August 30, 2018. As part of the deal, Argentina's government pledged to speed up plans to reduce the fiscal deficit. The managing director of the worldwide banking system, Christine Lagarde, said Wednesday that revisions were warranted in light of "the more adverse global market conditions, which had not been fully anticipated in the original program". Twelve-month inflation was clocked at 31.2 percent in July.

The worldwide lender has admitted that it had a made a string of mistakes that contributed to Argentina's economic implosion. That could hurt Macri's re-election prospects in next year's presidential race.

"I think today's interest hike announcement will do nothing but leave investors even more jittery", said Monica de Bolle, senior fellow at the Peterson Institute for International Economics. "I understand this, and I want you to know I am making all decisions necessary to protect you".

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.

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