(RepublicanNews.org) – Argentina’s attempts to stop its currency from melting down have left its central bank broke, Bloomberg reported.
According to the consulting firm 1816 Economia & Estrategia, Argentina has already drained its liquid international reserves as well as another estimated $1 billion as the South American nation contends with impending recession and a historic drought.
Without cash on hand, there is some question as to how much longer the government can prevent the peso from collapsing, and a currency devaluation will likely fan 104 percent inflation while exacerbating social unrest ahead of the October presidential elections.
For decades, Argentina has struggled to build and maintain healthy levels of international reserves, running through available cash to fight rising prices and meet its obligations on overseas bonds.
While the country now has less than $34 billion in foreign reserves, the majority is currently locked up in less liquid assets like gold, credit lines with the Bank of International Settlements and China, and any US dollars Argentines have in savings. This is a problem for a country desperately in need of cash on hand.
Its liabilities in foreign currency already outpace total reserves by around $1 billion, the worst ratio since Argentina’s economic crisis in the early 2000s.
Over the weekend, Bloomberg reported that the country plans to unveil a series of emergency measures to curb additional currency losses, including an increase to its key interest rate.
Argentina’s monetary authority will raise its benchmark interest rate by 600 basis points to 97 percent while boosting intervention in the foreign exchange market, an official from the Economy Ministry said.
The government plans to obtain further international support to increase its dwindling international reserves by speeding up deals with Brazil and China through the BRICS (Brazil, Russia, China, and South Africa) group and the International Monetary Fund.
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