Socialisms Collapse Continues Worldwide as Argentina is now officially in the Sovereign Debt Crises line. As Sovereign Debt Continues to pile up under the promise of socialistic freebies, wise investors worldwide always find a way to preserve and protect their wealth.
Central Bank Hikes Argentina interest rate to 60% as the Argentine Piso collapses
Argentina is struggling to cope with yet another financial crisis.
Investors are increasingly concerned Latin America’s third-largest economy could soon default as it struggles to repay heavy government borrowing. This comes after Argentina’s government unexpectedly asked for the early release of a $50 billion loan from the International Monetary Fund (IMF) on Wednesday.
The Argentine peso crashed to record lows on the news. It saw steep losses in the previous session and collapsed another 15 percent to hit 39 pesos against the U.S. dollar on Thursday morning.
The peso is down more than 45 percent against the greenback this year, exacerbating pre-existing fears over the country’s weakening economy while inflation is running at 25.4 percent this year.
On Thursday, the central bank said it was increasing the amount of reserves that banks have to hold, in a bid to tighten fiscal policy and shore up the currency. It hiked rates by 15 percentage points to 60 percent from 45 percent and promised not to lower them at least until December.
Argentina’s economy ‘likely to contract this year
The IMF said in a statement Wednesday that it would look to “revise the government’s economic plan with a focus on better insulating Argentina from recent shifts in global financial markets.”
The Washington D.C.-based institute also added that its plan included “stronger monetary and fiscal policies and a deepening of efforts to support the most vulnerable in society.”
“It is now unclear if that will be enough to stabilize the government’s finances amid (a) persistent reserve drain,” Deutsche Bank‘s Jim Reid said in a research note published Thursday.
In addition to IMF support, Argentina’s government has also raised interest rates to 45 percent in an attempt to curb inflation and slow the peso’s dramatic slide.
Republished from CNBC: Sam Meredith
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