Argentina's president says the IMF has agreed to has agreed to accelerate funding in support of his government's austerity program.
Argentina's President Mauricio Macri said Wednesday that the International Monetary Fund has agreed to accelerate funding in support of his government's austerity program, but his comments did little to calm the market as the country's currency came under renewed pressure.
IMF chief Christine Lagarde said the Washington-based lender would look at speeding up payments of the bank's $50 billion loan after talks with Macri earlier Wednesday.
The IMF approved the $50 billion, three-year standby loan in June.
Lagarde said the IMF would work to strengthen its arrangement with Argentina and "re-examine the phasing of the financial program".
The "more adverse international market conditions" battering Argentina's economy "had not been fully anticipated," she admitted in a statement.
Macri called for the early release of the funds in a phone call with Lagarde on Wednesday.
The development came amid heightened volatility in Argentina's financial and currency markets, which have been battered by uncertainty over inflation, an economic downturn and budget deficits.
Macri sought to soothe the turbulence in a statement before markets opened, assuring Argentines that help is on the way.
"Over the past week, we have had new expressions of lack of confidence in the markets, especially over our ability to obtain financing for 2019," Macri acknowledged.
He said the IMF would provide "all the funds necessary to guarantee the fulfillment of the financial program next year."
That would involve accelerating the disbursement of a $50 billion standby loan that the IMF agreed to extend to Argentina in June following a run on the peso.
In return, the government has committed to reducing its budget deficit to 2.7 percent this year, from 3.9 percent in 2017, and to 1.3 percent of GDP next year.
But the Argentine peso continued its decline shortly afterwards, plummeting 6.99 percent through Wednesday to fall to 34.48 to the dollar by the close.
"The announcement was vague and was made by the president, which has its risks," said analyst Lorenzo Sigaut of consultants Ecolatina, who said it would have been more convincing if announcement was made by the economy minister.
He said overall doubts of an Argentine default on the loan had been assuaged "only until Macri's term ends (in December next year) but as of 2020, they remain latent."
"The dollarization of assets is fueled internally by Argentine's distrust of the peso, because the government has promised much on the economy but hasn't delivered," said Sigaut.
Part of the $50 billion loan is to be allocated to support the budget, and the rest to the country's central bank to shore up the peso over a three-year period.
The first $15 billion tranche has already been released.
Economist Matias Carugati said there was a lack of information coming from the government to calm the markets.
"We know that the IMF is advancing money to cover us next year, but how much will they advance us and under what conditions?" he asked.
He maintained however that "the risk of a default is exaggerated."
"Argentina does not have a solvency problem, but more a short-term liquidity issue. It's urgent to achieve financial calm and then see how to repair the damage."
Inflation in Argentina is projected to surpass 30 percent by the end of the year, and the peso has plunged in value by more than 40 percent since the start of 2018.
The economy contracted 6.7 percent in June, the third month in a row of negative growth, and the annual growth rate was a negative 0.6 percent.