Central Bank of Argentina in Dire Straits
The Central Bank of Argentina has been relying heavily on Chinese yuan to keep its operations afloat. While this has been a lifeline for the country, the situation is not looking good. Here are the key points:
1. Selling Chinese yuan: The bank has been selling yuan to national companies to finance their imports, while also buying dollars to regain foreign currency liquidity.
2. Losses incurred: On July 10, the bank lost almost $72 million in reserves by selling 790 million yuan. The next day, it lost another $98 million by selling 770 million yuan.
3. Lifeline for Argentina: The pivot to the Chinese yuan has helped Argentina make a partial payment to the IMF in June, but half of the available swap amount has already been spent.
4. Reserves at historic lows: The net reserves of the Central Bank of Argentina have reached historically low levels, with a decrease of $18 billion in 2023 alone.
5. Seeking IMF agreement: Argentina is now trying to expedite a new agreement with the IMF to access at least $4 billion. However, even with this, the country’s net reserves are expected to hit -$8 billion.
Hot Take: The Central Bank of Argentina is in a precarious situation, relying on Chinese yuan to stay afloat. The country needs to find a way to increase its reserves before it reaches a point of no return.
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