Argentine Peso Hits New Low

Argentina crisis Christine Lagarde

Argentina's central bank on Thursday raised its benchmark interest by 15 percentage points to 60 percent, the highest in the world, after the peso plummeted to a new record low. The crisis left one out of every five Argentines unemployed and plunged millions of people into poverty.

The Argentine peso has lost more than 40% of its value against the U.S. dollar this year and inflation is rampant.

The slide comes after its central bank moved to raise interest rates and President Mauricio Macri and International Monetary Fund chief, Christine Lagarde, agreed to hasten the installments of a $50bn (£38bn) IMF loan.

Macri said that in the past week there have been "expressions of a lack of trust in the markets" about Argentina.

Argentina's Peso suffered its biggest one-day slide in nearly three years on Wednesday 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.

According to Cristine Lagarde, the International Monetary Fund's managing director said in a statement that she is stressing her support for the country's policy efforts and the financial institution's preparedness to help the government in its plans of revision of its policies.

The request underscores the government's need to reassure markets that it has enough money to fund itself through 2019 amid the second recession in two years, inflation near 30 percent and the world's highest borrowing costs. His government has since announced more than $2 billion in budget savings, a process he promised to continue.

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The "more adverse global market conditions" battering Argentina's economy "had not been fully anticipated", she admitted in a statement.

In the last 40 years, Argentina has lived through at least four serious economic crises.

He said overall doubts of an Argentine default on the loan had been assuaged "only until Macri's term ends (in December next year) but as of 2020, they remain latent".

In return for International Monetary Fund support, the government has committed to reducing its budget deficit to 2.7 percent this year, from 3.9 percent in 2017, and to 1.3 percent of GDP next year.

Ratings agency Moody's said the Central Bank's move was "a clear signal that economic policy approaches have not been sufficient to contain the financial pressures facing Argentina". Twelve-month inflation was clocked at 31.2 percent in July.

The IMF has admitted that their internal audit unit concluded that they failed to provide oversight and they believed too much in the growth and the success of Argentina's economic reforms.

The political fortunes of Macri, who until recently had been expected to easily win re-election late next year, may also be waning. "I understand this, and I resolve on you to know I'm making all decisions needed to guard you", Macri acknowledged.

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