Argentina plans to ask the International Monetary Fund to enhance a payout scheduled for later this month by an undefined amount, according to a senior government official, after the central bank was compelled to weaken its official exchange rate by 18%.
The peso’s dramatic depreciation was almost unavoidable as speculators, taken off guard by the unexpected primary victory of outsider candidate Javier Milei, pushed the currency to record-low levels in parallel markets. Argentina’s central bank is running out of reserves to maintain the peso in the foreign exchange market.
The decision to decrease the official exchange rate to 350 pesos per dollar was made by the government to handle currency concerns arising from Sunday’s vote upset, an official said, declining to be named in order to disclose continuing conversations with the Fund.
The IMF has agreed to lend Argentina up to $10.8 billion for the rest of the year as part of a refinancing arrangement mediated by Economy Minister Sergio Massa, who is also running for president in the Oct. 22 election.
The first payment of $7.5 billion is scheduled by the end of August, following the Fund’s executive board’s ratification of a staff-level agreement.
President Alberto Fernandez’s administration has resisted calls for a large currency depreciation in order to prevent stoking even greater inflation in the run-up to presidential elections. Consumer costs are already increasing at a rate of more than 115% each year.
However, the official stated that the government expects the consequences of Monday’s devaluation to be controlled and maybe even milder than in prior instances.
