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Montevideo, September 28th 2021 - 07:22 UTC

 

 

Argentina makes payment to Paris Club, loses reserves to cope with domestic demand of foreign currency

Wednesday, July 28th 2021 - 09:10 UTC
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The BCRA went back to selling foreign currency due to a rebound in demand The BCRA went back to selling foreign currency due to a rebound in demand

Argentina Tuesday made a payment to the Paris Club which resulted in the country's reserves falling to the US $ 42,837 million, it was reported.

The disbursement of around US $ 220 million has sunk the administration of President Alberto Fernández into further uncertainty. Although the unofficial peso/dollar exchange rate fell slightly Tuesday, what will happen in the coming days with a stateless powerful to intervene in the currency markets remains to be seen.

Tuesday's was the first partial payment announced by Economy Minister Martín Guzmán after reaching an understanding through which maturities were extended until March 31, 2022, thus allowing the country to avoid default.

In return, Argentina agreed to pay US $ 430 million in instalments up to that date, well below the US $ 2.4 billion it had to initially disburse.

“In the 8-month period, instead of facing the approximately US $ 2,400 million programmed, a set of payments will be made that will total around US $ 430 million,” Guzmán had announced. “It implies a financial relief for Argentina of 2,000 million dollars,” he had added.

According to Guzmán those US $ 430 million were not going to be “an advance payment, but rather a proportional on account of capital.”

The first disbursement was scheduled for the end of July and the rest will not take place until next year, since Guzmán considered that paying the total amount stipulated before the renegotiation “would have been a blow to international reserves and generated more exchange rate and macroeconomic instability in general.”.

In the meantime, Argentina continues negotiations with the International Monetary Fund (IMF) to refinance a debt of almost 45 billion US dollars while it waits for Special Drawing Rights (SDR).

This new dent to the country's reserves came at a moment when authorities were able to yield favourable balances in daily interventions compared to a good level of genuine supply from the private sector, boosted by an international increase in the prices of commodities, especially soybeans and corn, in addition to a higher collection of export duties.

In any case, Argentina's Central Bank (BCRA) Tuesday went back to selling foreign currency after weeks in buying mode due to a rebound in demand.

 

 

Categories: Economy, Politics, Argentina.

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