The International Monetary Fund has agreed to increase a lending package with Argentina by $7.1 billion to a total of $57.1 billion, Economy Minister Nicolas Dujovne said Wednesday.
The South American country had secured $50 billion in financing as part of a deal worked out with the IMF in June after Argentina was battered by a currency crisis, a run on the Argentine peso and double-digit inflation.
IMF Director Christine Lagarde said that Argentina’s central bank has agreed as part of the deal to intervene in currency markets only in case of extreme circumstances and that the new amount will help Argentina’s government face its challenges.
“The Central Bank of Argentina has decided to adopt a floating exchange rate regime without intervention. In the event of extreme overshooting of the exchange rate, the (bank) may conduct limited intervention in foreign exchange markets to prevent disorderly market conditions,” Lagarde said at a joint news conference with Dujovne in New York.
President Mauricio Macri had been pushing for a new deal to restore investor confidence and ease concerns that Argentina will not be able to meet its debt obligations next year.
Many Argentines joined in a nationwide strike Tuesday to protest Macri’s handling of the economic turmoil and his decision to turn to the IMF for help.
Most Argentines blame the international lending institution for encouraging policies that led to the country’s worst economic crisis in 2001. It resulted in one of every five Argentines being unemployed and millions sliding into poverty.
The IMF has admitted it made a string of mistakes that contributed to the economic implosion. A 2004 report by the IMF’s internal audit unit concluded it failed to provide enough oversight and overestimated growth and the success of economic reforms, while it continued to lend Argentina money when its debt burden had turned unsustainable.
“The IMF did not press the authorities for a fundamental change in the policy regime and in December 2001 effectively cut off financial support to Argentina,” the report said.
Without further IMF support, the government was forced to declare a record $100 billion sovereign debt default.