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On 17 February, Argentina’s central bank raised its base interest rate by 2.5 percentage points to a whopping 42.5 percent.
The hike, the second this year, is part of the country’s attempt to comply with the International Monetary Fund’s (IMF’s) urgings that the country’s interest rate exceed the pace of inflation, now running at 51 percent.
Argentina’s government is in negotiations with the IMF to reschedule the country’s $40 billion in outstanding loans from the agency.
The hike lifts the effective annual interest rate, which factors in compounded interest, from 48.3 percent to 51.9 percent, bank insiders told the Financial Times, edging it just above the official pace of inflation.
Bank officials consider the effective annual rate to be the one that needs to exceed inflation to comply with IMF guidelines, the FT reported.
As part of the plan, the bank will issue a 180-day note carrying a nominal interest rate of 47 percent.
The IMF and Argentine government hope to reach an agreement this month.
TREND FORECAST: Long forgotten and barely reported, is that in 2018, under the regime of president Mauricio Macri, the “pro-business” leader saddled the nation with a $57-billion debt to the IMF.
The Argentine peso crashed in mid-2018 after the country entered a recession in the year’s second quarter. The peso lost more than half its value that year and fell more than 35 percent in 2019.
Before the COVID War began, Argentina’s economy contracted at a rate of 3.1 percent in 2019. Inflation is rampant, reaching 52.9 percent in December. It’s estimated more than 40 percent of the country’s 44 million people now live in poverty.
According to the IMF, it “is not economically nor politically feasible” for Argentina to fully repay its more than $100 billion foreign debt.
And as we had forecast, when the “stimulus” money dries up, interest rates rise, equity markets crash, and the world descends into the “Greatest Depression,” social unrest will escalate in Argentina and nations across the globe.
The wars between the people and politicians will become common battle cries as the rich continue to get richer and the masses sink lower into economic despair.
TREND FORECAST: As the global economy slows, Argentinian economic conditions, as with many nations across the globe, will continue to deteriorate and social unrest will sharply escalate. It’s the “New World Disorder,” one of our 2020 Top Trends.