Argentina plans to request an increase in its scheduled disbursement from the International Monetary Fund (IMF) later this month, following an 18 percent devaluation of the peso on Monday. A senior government official said Argentina will ask the IMF to increase the amount it provides as part of their agreement, though the specific additional amount is unclear.
The peso sharply weakened after voters unexpectedly elected outsider candidate Javier Milei in the recent primary elections. Investors pushed the currency to record lows in unofficial markets, adding pressure as the central bank runs low on reserves. In response, authorities devalued the peso to 350 peso from 287 peso per dollar.
The government took the proactive step to address currency pressures stemming from the weekend's election results, according to the official. Argentina has a 10.8 billion dollar loan agreement with the IMF for the remainder of 2023. The first 7.5 billion dollar disbursement is expected at the end of August pending IMF board approval.
Despite resisting devaluation previously to avoid fueling inflation above its current 115 percent rate, the official believes the effects of Monday's move will be contained or milder than past devaluations. However, markets still see another adjustment as likely given the large gap between the official and parallel exchange rates. The government and central bank face tough policy decisions in the weeks ahead.
