CORRECTED-Argentina's FX reserves hit lowest level since 2016 on drought impact- REUTERS
by Jorge Otaola
(Corrects period to “seven” years in first paragraph from six years)
BUENOS AIRES, May 3 (Reuters) - Argentina’s central bank reserves are at their lowest level in almost seven years, official data show, as a painful drought stymies key grains exports and a weak peso currency forces authorities to spend dollars to support it.
Preliminary data from the central bank shows gross reserves at just over $35 billion, the lowest since the middle of October in 2016, which comes as the government battles inflation over 100% and after a volatile week for trading in the peso.
The drain in reserves has led Argentina to tighten capital controls, roll out incentives to spur soy sales and open talks with the International Monetary Fund (IMF) over easing reserve accumulation targets as part of a $44 billion debt deal.
The reserve drop of some $4 billion since the end of March and $9.5 billion this year, has been compounded by one of the worst droughts in the country’s history, which has battered its soy and corn crops, the main drivers of export dollars.
“Absolutely all the macro fundamentals are much worse than in previous currency crises,” said consultancy Invecq.
Economist Gustavo Ber said that income from grains sales would be key, with the government hoping a preferential “soy dollar” exchange rate could spur more sales this month after falling short of expectations in April.
“We’re waiting for larger settlements in the ‘farm dollar’, and for an accumulation of foreign currency,” he said.
“Measures continue to be added to mitigate exchange rate tensions while net reserves of the central bank continue to decline to critical levels.”
Reporting by Jorge Otaola; Editing by Adam Jourdan and Daniel Wallis