Argentina’s credit rating could be cut further into junk territory by S&P Global Ratings amid a plunge in the peso and a bailout from the IMF.
S&P in a statement on Friday said that it might lower the nation’s long-term foreign currency rating from its “B+” grade, which is four notches below investment grade and on par with Turkey, Greece and Fiji.
The ratings company cited the risk of worsening creditworthiness and exchange rate volatility as potential threats to the economic adjustment measures undertaken by Argentine President Mauricio Macri’s administration.
“Recent pressure on the Argentine currency could jeopardize the effective implementation of economic adjustment measures, absent further steps to boost investor confidence,” S&P said.
However, Macri’s commitment to stabilizing South America’s second-largest economy through difficult austerity measures, such as a US$50 billion credit line from the IMF, should help maintain the government’s access to capital markets, which the nation had been locked out of for more than a decade.
After tumbling a world-leading 50 percent this year, Argentina’s peso stabilized on Friday, following a series of steps by the Macri administration.
The central bank on Thursday raised its benchmark interest rate to a world-high 60 percent.
A day earlier, Macri made a surprise appeal to the IMF, seeking to expedite payments under the record US$50 billion credit line agreed in June.
The fund looks set to oblige, saying that high-level talks would begin on Tuesday with the aim of “rapidly” submitting a revised lending plan to the IMF board.
The World Bank said it would like to express its “strong support” for Argentina on Friday, days before Macri was set to unveil new economic measures in a bid to calm market jitters.
“The World Bank expresses its strong support to Argentina in the current context of continued market turbulence,” a spokesman for the global poverty-fighting institution said.
The World Bank plans to make US$1.75 billion in previously announced commitments available to the country within the next 12 months, the spokesman said.
A program to strengthen and expand support for children would be considered by the World Bank board within several weeks, he added.
Additional reporting by Reuters
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