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Argentina central bank clamps down further on dollar access as peso swoons

Credit: REUTERS/AGUSTIN MARCARIAN

Argentina's central bank further restricted access to the U.S. dollar on Tuesday by tightening foreign exchange controls for purchases abroad, as the crisis-hit country watches its peso currency weaken against the greenback.

By Walter Bianchi and Eliana Raszewski

BUENOS AIRES, Sept 15 (Reuters) - Argentina's central bank further restricted access to the U.S. dollar on Tuesday by tightening foreign exchange controls for purchases abroad, as the crisis-hit country watches its peso currency weaken against the greenback.

In a bid to protect its dollar reserves, the bank tightened controls on buying dollars in the foreign exchange market, transactions involving dollar-denominated bonds and credit card purchases made in foreign currency.

The bank said in a statement that it kept the individual dollar purchase limit for savings at $200 per month, while increasing the taxes that people pay on those purchases.

Access to dollars for the purpose of paying off foreign credit card debt and for purpose of saving in a stable currency will be taxed at 35%, and restricted to the $200 limit, "in order to prioritize the allocation of foreign currency to the recovery of economic growth and employment," the statement said.

Earlier on Tuesday the government unveiled its 2021 budget proposal, which estimates the peso will end next year at 102.4 per dollar versus 75.2 to the greenback currently.

Argentina's economy is in recession for the third year in a row, with a central bank poll predicting a 12% contraction in 2020. The country remains in the grip of the coronavirus, which has hit Latin America particularly hard.

Companies will have to submit refinancing plans to the central bank. They will have access to only 40% of the dollars needed to pay their financial debts and will have to renegotiate the rest, the central bank statement said.

Eyes will be focused on the foreign exchange market on Wednesday to see if the breach widens between the official and black market exchange rate in reaction to the new policies and as a measure of the lack of confidence in the local currency.

(Reporting by Walter Bianchi and Eliana Raszewski; Writing by Hugh Bronstein; Editing by Christopher Cushing)

((hugh.bronstein@thomsonreuters.com; 5411 4318 0655; Reuters Messaging: hugh.bronstein.thomsonreuters.com@reuters.net))

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