Argentina`s beleaguered peso bounced back slightly on Friday after the central bank auctioned $250 million in dollar reserves and the International Monetary Fund issued a strong statement of support for the President Mauricio Macri`s government.
But with frustration rising over inflation of more than 30 percent and austerity measures required under a $50 billion IMF standby deal, Agriculture Ministry employees protested budget cutbacks and members of the opposition Citizens` Unity party called for countrywide marches against Macri Friday evening.
The party`s leader, former President Cristina Fernandez, a populist and proponent of government intervention in the economy, may run against Macri for president next year, raising further questions about the country`s economic prospects. She has, however, been tarred by a graft scandal marked by the jailing of several of her former officials.
Macri is caught between voters tired of fiscal belt-tightening measures already implemented and investor pressure to unveil a package of further spending cuts austere enough to keep calming the markets.
"We lost our jobs because of the government`s orthodox, fundamentalist policies," said Jorge Harvez, 63, an office worker with the agriculture ministry who was fired on Thursday.
One of about 250 protesters blocking traffic in front of the ministry`s main office in Buenos Aires, Harvez blamed the layoffs on the austerity push.
"We will continue blocking the streets until we force the ministers to negotiate with us," he said.
A spokesman for the Agriculture Ministry said 548 people in total had been laid of, most in a division that assists small-scale farmers.
"The decision seeks to make more efficient use of state resources," the spokesman said.UNPOPULAR IMF
Many Argentines blame the IMF for imposing budget cuts that plunged millions into poverty during the 2001-02 economic crisis.
The peso strengthened 6.08 percent on Friday to close at 37 to the dollar after the central bank said it would auction $675 million in foreign reserves. On balance the currency lost 25.89 percent of its value against the greenback in August and 49.59 percent so far this year.
It lost 20 percent on Wednesday and Thursday alone after Macri said he would ask the IMF to advance disbursements under a $50 billion financing deal. The announcement raised alarms among investors that Argentina might be hard pressed to fund its 2019 deficit.
"Argentina has the full support of the Fund and we are confident that the strong commitment and determination of the Argentine authorities will help the country overcome the current difficulties," IMF spokesman Gerry Rice said in a statement.
The backing expressed by the Fund helped the peso stabilize, at least temporarily, said Ignacio Labaqui, an analyst for New York consultancy Medley Global Advisors.
"IMF support is definitely helpful at this stage," he said.SPENDING CUTS
A policy package containing further government spending cuts is expected to be announced next week. But any more belt tightening will meet strong opposition, as discontent with Macri grows over high inflation, a weak economy and subsidy cuts that have jacked up household heating and water bills.
With more austerity on the way, and utility prices set to rise again in the fourth quarter, low and middle income Argentines are hard-pressed to pay their monthly household costs. Yet fiscal tightening is exactly what the IMF and the markets want to see.
"If the government fails to deliver a convincing austerity package, the peso will probably slide further and another large interest rate hike would be likely," consultancy Capital Economics said in a research note.
The central bank has already hiked its monetary policy rate to 60 percent.
IMF Managing Director Christine Lagarde and Finance Minister Nicolas Dujovne were scheduled to meet on Tuesday "to advance the dialogue," Rice said.
Speaking to reporters on Thursday night, Dujovne said the government would announce a set of new economic measures on Monday, and would target a 2019 primary fiscal deficit below the 1.3 percent of gross domestic product agreed with the IMF.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)