Few resources remain to stave off crisis in Argentina

Significance

The sharp fall came days after President Alberto Fernandez announced that he would not seek re-election, prompting rumours of an imminent devaluation that the government blames on opposition machinations. However, with the parallel exchange rate now more than double the official ARS229:USD1, a sharp devaluation appears inevitable.

Impacts

• New disbursements would ease short-term pressures but leave the incoming government facing heavy debts and policy restrictions.
• The government is threatening legal action against opposition leaders it alleges are lobbying the IMF to halt disbursements.
• The government no longer has the resources to stem social unrest, which is likely to mount ahead of elections.
• Central Bank dollar purchases to boost reserves will require printing money, fuelling inflation already above 100%