Thursday, Sep 16, 2021
International Finance
Economy Featured

Argentina’s instability slows currency devaluation

Argentina currency devaluation_IF_Image
This adds to the increasing pressure on the peso and declining foreign reserves, further affecting the economy on many levels

Argentina is expected to maintain a slow rate of currency devaluation as it was not possible to achieve the needed stabilisation, media reports said. The slow movement in currency adds to the increasing pressure on the peso and declining foreign reserves. The Latin country is mired in a debt crisis on the back of defaulting in its loan payment within the stipulated deadline. 

The devaluation in the currency will further hurt its depressing economy as stabilisation could not be achieved, according to the exchange. It seems that there is a discrepancy in the official exchange rate and the rate in the informal currency markets which had reached 143 percent this week. This can largely be attributed to the lack of trust among investors and the increasing demand for dollars in the black market, media reports said. 

Members of the Ad Hoc Group of Argentina Exchange Bondholders and of the Argentina Creditor Committee said in a statement “Argentina’s economic authorities have not only failed to restore confidence, but policy actions taken in the immediate aftermath of the debt restructuring have dramatically worsened the country’s economic crisis. Rather than allowing prices to achieve equilibrium and stimulate desired economic activity, the central bank has reinforced an exchange rate policy that promotes imports, discourages exports and has depleted reserves to a dangerous level.”

Macroeconomic stability for the country is receding on the back of derailing movements. As the Argentine government is facing several challenges, creditors have contributed to the situation, allowing the country to begin on a fresh note.

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