Buenos Aires (AFP)

Argentina's new finance minister, Hernan Lacunza, Tuesday made the stabilization of the peso his priority and pledged to respect the fiscal targets set under the agreement reached in 2018 with the International Monetary Fund (IMF).

The government's priority will be "to preserve the exchange rate as a first-rate goal" and to "respect fiscal targets," Lacunza said at his first press conference.

Hernan Lacunza, former director of the Central Bank between 2005 and 2010, succeeded Nicolas Dujovne, the government since January 2017, who announced his resignation on Saturday.

This departure followed a week of turbulence in the markets that saw the peso lose more than 20% of its value and the stock market dive by 30%, in the wake of the defeat in the primaries, considered a dress rehearsal before the election presidential election in October, of center-right president Mauricio Macri.

Mr. Dujovne was the main initiator of the agreement reached with the IMF to obtain a record loan of 57 billion dollars in exchange for austerity measures to balance the public accounts. Two successive monetary crises in 2018 have lost 50% of its value to the Argentine peso.

"To allow greater volatility" of the peso "would only add uncertainty and inflationary pressures," insisted the new minister, speaking shortly before the opening of markets.

In the aftermath, however, the Argentine currency depreciated further, trading at the first trade at 58.88 pesos for one dollar, a decrease of 1.29%. The Merval index of the Buenos Aires Stock Exchange, meanwhile, yielded 7.82%, the most spectacular falls for banks, with decreases of up to 15%.

Monday, when the stock market was closed due to a holiday, the Argentine shares listed in New York had already dropped and the "country risk", the solvency index measured by JP Morgan, has exceeded 1,800 points, the highest since ten years.

The IMF announced Tuesday its intention to send "soon" a mission to Buenos Aires. "We are keeping a close eye on recent developments in Argentina and talking to the authorities," IMF spokesman Gerry Rice said.

- Guarantee stability -

"We have many arguments to move forward, to ensure the tranquility of the Argentines and to bequeath to the next government (which will take office on December 10th) a coherent and solid platform to revive growth", said the Minister.

Shortly afterwards, the President of the Central Bank, Guido Sandleris, ratified the objective of stability of the foreign exchange market.

He stressed that "there is a broad consensus that the exchange rate is now very competitive". "The Central Bank will continue to conduct a restrictive monetary policy" to fight against inflation which reached 25% between January and July, he added.

Mr Sandleris also assured that international reserves were available to moderate the exchange rate and ensure the stability of the financial system, a message intended to reassure Argentinians still traumatized by the deep economic crisis of 2001.

At the time, the South American country, unable to meet the repayment deadlines of its debt, had experienced the largest payment default in history and a very serious economic and social crisis.

The Argentineans will go to the polls on October 27th. The center-left Peronist Alberto Fernandez is a favorite, after his wide victory in the primaries where he won 47% of the vote, far ahead of the outgoing, Mauricio Macri (32%) who seeks a second term.

Under pressure, Macri announced last week salary increases and a reduction in income tax. It also decided to freeze the price of fuel without the agreement of the oil companies, and suspended for four months the value-added tax (VAT) on basic foodstuffs.

The third largest economy in Latin America has been in recession since 2018, with a poverty rate of 32% and an unemployment rate of 10.1%. The annualized inflation of 55% is one of the highest in the world.

© 2019 AFP