Argentina opened talks with the International Monetary Fund on Tuesday to seek a financial aid package, 17 years after the country defaulted on its debt and 12 years after cutting ties with the fund.
As a bout of market turbulence rocks Argentina’s economy, President Mauricio Macri announced that “as a preventative measure, I have decided to begin discussions with the International Monetary Fund for them to grant us a line of credit. As #Argentina’s peso falls to new lows of 23,5 pesos/US$, president Macri delivers dramatic televised speech announcing opening of talks with the IMF for a new credit line. IMF chief Christine Lagarde said talks will begin soon on ways to shore up Argentina’s economy. She welcomed Macri’s statement, saying that “discussions have been initiated on how we can work together to strengthen the Argentine economy and these will be pursued in short order.” After the country’s currency fell four percent compared to the US dollar, Macri said in a televised speech he had held his first conversation with Lagarde but did not say how big a line of credit Argentina is seeking. “We are pursuing the only path open to us to emerge from stagnation, seeking to avoid a great economic crisis that will set us back and hurt everyone,” he said. Economy Minister Nicolas Dujovne told reporters it was too soon to talk about the details and conditions “but we have agreed that the IMF will offer financial support to Argentina.” Macri justified the decision to go to the IMF, saying that while the economy had enjoyed favorable conditions during the first two years of his presidency, conditions have changed. “We are among the countries of the world that are most dependent on foreign financing, a product of the enormous public spending we inherited and are putting in order,” he said. IMF financing would strengthen his “program of growth and development, giving us greater backing to confront this new global scenario and avoid a crisis like those we have had in our history.” After taking office in December 2015, Macri floated the Argentine peso, ending the strict controls in place under the government of Cristina Kirchner. But the strengthening of the US dollar in recent days has impacted the peso more than other currencies: it dropped 4.61 percent to 23.41 to the dollar in opening trading Tuesday, and strengthened slightly after Macri’s speech at 23.06.
Argentina’s Central Bank on Friday raised its key interest rate to 40 percent after the peso plummeted in value earlier in the week.
Although the bank’s actions appeared to have stabilized the currency on Monday, the peso fell sharply again on Tuesday, prompting a sell-off on the Buenos Aires Stock Exchange.Macri’s government last week lowered its target for the fiscal deficit to 2.7 percent of GDP from 3.2 percent.