The International Monetary Fund renewed its support of Argentina’s austerity economic policy on Monday encouraging the country’s Central Bank to sell off about US$ 3.4 billion daily in reserves.
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"Implementing this plan should eliminate an important source of vulnerability while contributing to a more effective monetary policy framework," said IMF spokesman Gerry Rice said in a Monday tweet. His statement coincided with the fund’s first follow-up mission to Argentina after right-wing president Mauricio Macri’s administration approved a US$50 billion IMF standby loan in late June.
"The plan of the Argentine authorities to accelerate the reduction of the (central bank) stock was carefully designed by the local government. The Fund supports the efforts of the authorities in this area that are consistent with the understandings reached through the stand-by agreement backed by the IMF," the Rice tweeted.
Central Bank president Luis Caputo used the IMF support to legitimize the sell-off.
"We have IMF support to cancel (central bank) with reserves," said the central bank president.
Caputo said the daily sell-offs, which begin Tuesday, are meant to contain the price of the dollar, which gained on the Argentine peso another 4.10 percent on Monday placing it a historic low of 30 pesos to the dollar.
Macri and bank officials also raised interest rates another 5 percent to 45 in an effort to stabilize the economy. They used the same tactic back in May, but the peso has only weakened and inflation rose over 3 percent from 26.4 to 29.5 percent between May and June.
"The most important thing is that we will normalize the financial system. Today we have a financial system that is not normal,” Caputo added.
"The Fund team will hold meetings with government officials and the Central Bank as well as representatives from academia and the private sector," until August 22, IMF officials stated.
Argentines have protested the IMF loans en masse several times since they took effect in May.
Much prior to accepting the loans Macri and a conservative congress have already implemented a slew of IMF-like austerity measures. He and his administration drastically cut energy, transportation and gas subsidies, eliminated over one thousand state jobs, and cut taxes for mining and agro-industrial sectors all with the stated intent to cut the country’s national deficit and control the nation’s inflation.