Argentine stocks rose on Thursday following rumors that the country is in talks with the International Monetary Fund (IMF) for a new program.
This initiative aims to secure additional financing, accelerating Argentina's exit from its strict capital controls, as reported Bloomberg citing a senior government official, who preferred to remain anonymous.
The official revealed that the IMF is advocating for a faster depreciation of the Argentine currency under its “moving parity” system. Additionally, the Fund is urging Argentina to keep its interest rates above the current inflation rate, which alarmingly has reached approximately 250%.
Milei assures exit from capital controls in the middle of the year
in a interview with the Financial Times, the newly elected president of Argentina JavierMiley He conveyed his determination to advance reforms without the need for congressional approval, especially after 2025.
Milei's strategy, as he states, is aligned with academic recommendations and aims to eliminate dollar exchange controls by mid-year, which could mark a “turning point” for Argentina.
Despite the potential challenges, Milei ruled out the likelihood of social unrest during his term, except in cases of foreign infiltration.
President Milei's administration is interested in removing capital controls, and IMF support is seen as a crucial accelerator in this process. Milei believes that cleaning up the central bank will pave the way for lifting currency restrictions, a milestone the IMF estimates could be achieved by mid-year.
However, Argentina's economic outlook is under serious strain, with inflation soaring uncontrollably. The country recorded a staggering 250% increase in its consumer price index in January 2024, marking the most significant inflationary jump in 33 years.
Amid these challenges, Argentina's current financial obligations to the IMF loom large, with approximately $44 billion in debt outstanding from a previous agreement that failed to stay on track.
Market response
The anticipation of a new agreement with the IMF caused a notable rally in Argentine stocks on Thursday. He Global X MSCI Argentina ETF FIERCELY experienced an increase of 2.2%, with its main share being, Free market Inc. MELIexperiencing a 2% increase during the early morning trading hours in New York.
Banco Macro SA BMA emerged as the top gainer among Argentina's American Deposit Receipts (ADRs), marking an increase of more than 6%.
Since Milei's election victory, Argentine stocks have soared almost 20%. However, momentum has stalled over the past three months, as the Milei administration's reform initiatives have encountered significant resistance within the Argentine Congress, posing challenges to the government's ability to quickly implement the proposed changes.
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