The International Monetary Fund will allow Argentina to intervene in currency markets if the peso drifts above or below a certain range, a key policy change as the US$44-billion programme faces rising uncertainty before October presidential elections.
Economy Minister Sergio Massa announced Wednesday the IMF approved Argentina propping up the peso in certain instances.
Massa told reporters after meeting with IMF Managing Director Kristalina Georgieva in Washington that only his economic team and IMF staff will know the range that will define when Argentina can intervene in order to avoid market speculation and manoeuvres.
Argentina has multiple exchange rates with the official controlled by the government. It wasn’t immediately clear if Massa was referring to intervention in the parallel exchange rates used for financial transactions, which are more volatile.
The IMF’s executive board approved a US$7.5-billion disbursement to Argentina Wednesday as part of the larger programme, which refinances payments Argentina owes the institution from a previous bailout that failed to stabilise the economy in 2018.
Massa said the August disbursement was the second-largest in IMF history. While the IMF confirmed the disbursement, fine print details of the programme were not yet public from the Fund by the time Massa held a press conference.
Argentina’s previous government attempted a similar system of trying to keep the official exchange rate within a range, or “non-intervention zone.” However, that administration made the currency range public everyday, a level of transparency Massa intends to avoid this time around.
Massa, who is also running for president in this year’s election, blamed the IMF for what he called imposing a devaluation on the government last week in order to receive the disbursement. Argentina’s Central Bank devalued the peso 18 percent on August 14 after a shocking primary election result where outsider candidate Javier Milei took the lead. The currency devaluation spurred sharp price spikes that will fuel inflation already over 100 percent.
Massa added Argentina would receive another IMF disbursement in November of about US$2.75 billion pending another staff-level agreement and board approval.
by Patrick Gillespie, Bloomberg