Argentina’s central bank reserves fell Monday to the lowest level since 2006 after the government made a payment to the International Monetary Fund to avoid falling into arrears.
Total gross reserves dropped to $24 billion after the government paid the IMF $2.6 billion by tapping its currency swap line with China and a bridge loan from a Latin American development bank. Economy Minister Sergio Massa said Monday morning in an announcement that Argentina wasn’t using any of its own money to pay the IMF.
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With inflation over 115%, historically low reserves are stoking market concerns about an abrupt currency devaluation of Argentina’s official exchange rate around the crucial Aug. 13 primary election. The government maintains strict controls on the peso.
Massa is also the ruling party’s main presidential candidate and faces a tough election bid against the worsening economic backdrop. His Peronist bloc lost a gubernatorial election Sunday in a province it had governed for 20 years. Argentina is also expected to be in recession by the end of the third quarter this year, according to the central bank’s most recent monthly survey.
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