WASHINGTON, Jan 25 (AFP): Argentina's sharp devaluation of its currency was necessary but the move could fuel its already-high inflation and increase the fiscal deficit, posing the government tough new policy challenges.
Still unable to tap global capital markets for funding because of its poor record on debt repayment, Buenos Aires will feel more pressure to tighten fiscal and monetary policy to slow price rises.
But if it pursues more reforms, like cutting domestic subsidies and strengthening protections for investors, the economy could come out stronger, analysts told AFP on Friday.
The Central Bank of Argentina cut the peso loose this week, reluctant to spend more of its depleted foreign exchange reserves to defend the currency.
Facing a mounting outflow of dollars by panicked Argentinians and foreign investors, the central bank let the peso drop 3.2 per cent on Wednesday and another 11 per cent on Thursday, the sharpest single-day fall since 2002.
This abandoned a more managed slide, which saw the currency lose around 30 per cent last year. Since January 1, the fall has been nearly 19 per cent.
Argentina devaluation doesn\\\'t solve deeper problems
FE Team | Published: January 26, 2014 00:00:00 | Updated: November 30, 2026 06:01:00
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