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ARGENTINA-GOVERNMENT-DEBT-FOREX-FINANCE
Fragile Argentina placing faith in IMF meeting
BUENOS AIRES, Sept 3, 2018 (BSS/AFP) – Argentina’s Economy Minister
Nicolas Dujovne heads to Washington on Monday to thrash out a hastily revised
loan deal with the International Monetary Fund to help revive South America’s
second-largest economy.
Dujovne will need to outline a convincing austerity program to restore
investor confidence that has plummeted along with the nation’s currency,
analysts say.
The minister said at the weekend his mission was to “continue to progress”
talks with the IMF “on additional disbursements in 2019.”
The talks scheduled for Tuesday follow a surprise announcement by President
Mauricio Macri last week that Argentina would seek faster disbursement of its
$50 billion credit line with the IMF.
That set off alarm bells among investors, concerned Argentina will default
on government borrowing, and triggered a run on the peso, which plunged 20
percent in two days before recovering slightly by Friday’s close.
The currency has lost half its value against the dollar since January.
A first $15 billion tranche of the loan has largely gone to propping up the
peso in recent months.
Argentina’s Central Bank hiked its baseline interest rate to 60 percent
last week in a further bid to stabilize the currency.
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– Low investor confidence –
Ratings agency S&P said Macri’s government must now show clear steps to
improve low investor confidence.
“Exchange rate volatility, as shown by recent pressure on the Argentine
currency, could jeopardize the effective implementation of economic
adjustment measures, absent further steps to boost investor confidence,” it
said in a statement on Friday.
S&P sees hope in Macri’s austerity measures however, which has seen his
government slash energy subsidies and shed 95,000 public service jobs since
January.
It suggested that IMF help, coupled with continued austerity measures,
could help gradually reduce inflation, which despite being a government
priority, is still running at more than 20 percent.
The IMF said its goal was to “rapidly conclude these talks and submit the
revised economic plan to the Executive Board.”
– ‘Strong commitment’-
Spokesman Gerry Rice said the Washington-based lender was “confident that
the strong commitment and determination of the Argentine authorities will
help the country overcome the current difficulties.”
However, analysts at Capital Economics warned in a report that “investor
confidence is fragile,” adding that failure to deliver a convincing austerity
plan on Monday would trigger further turmoil.
The market’s response exposed the magnitude of the crisis of confidence in
the Argentine government and its ability to pay off borrowing.
Dujovne is expected to provide details of the new proposals on Monday
before heading to Washington for Tuesday’s meeting with IMF officials.
Macri will be hoping to ride out a domestic storm from a public sector
incensed at his austerity drive to maintain Argentina’s access to capital
markets, which it was excluded from for over a decade.
However, Argentines point to increasing food, transport and energy prices,
saying they are paying an unacceptable price under Macri’s austerity program.
A recent poll by the Center for the Study of Work and Development showed
that one in two employed people fear losing their job.
Argentina has a bitter history with the IMF, which it last called on in
2001. Many Argentines view the tough conditions imposed by the crisis lender
then as having made the crisis all the harder to bear.
BSS/XINHUA/ 1020