BUENOS AIRES (Reuters) - Argentina’s foreign currency reserves have hit their lowest level since the end of last year, the most recent central bank data showed on Tuesday, at a time when the government has been burning through its dollars to help shore up the peso.
The recession-hit country has used up more than $16 billion of its reserves, in part to support the currency, since market-friendly President Mauricio Macri was beaten badly in a primary election on Aug. 11, spooking markets about potential political volatility ahead.
Argentina needs its foreign reserves not only to help protect its embattled peso but also to service high levels of dollar-denominated bonds, amid concerns the country could be headed for a default.
Reserves were at $50.16 billion on Sept. 12, the latest figures from the Banco Central de la República Argentina show, the lowest since mid-December last year, when inflation spiked and the peso shed half its value against the dollar.
(GRAPHIC: Dollar decline png - here)
Peronist rival Alberto Fernandez’s shock primary victory in August led many to worry that if he wins in the Oct. 27 general election, his running-mate, ex-President Cristina Fernandez de Kirchner, could pursue the interventionist policies she imposed during her two terms between 2007 and 2015.
After the primary result, the peso lost a quarter of its value in August alone. Macri ultimately imposed currency controls, and the peso has since steadied.
Argentina agreed to a $57 billion credit line from the International Monetary Fund last year to help avoid default. The IMF is reviewing whether to unlock the latest tranche of those funds. Many expect it to be delayed.
Investors worry that Latin America’s No. 3 economy could run short of foreign reserves in the run-up to the vote.
The peso ARS=RASL edged down on Tuesday in official and black market trades, while over-the-counter bonds were up slightly. The local Merval equities index .MERV gave up some ground amid profit-taking.
Reporting by Jorge Otaola, Walter Bianchi and Adam Jourdan; Editing by Sonya Hepinstall