Panic in Argentina as economy on brink of collapse - £742m meltdown

A political crisis in Argentina has spooked markets and prompted the country's central bank to sell some £742.2million ($1billion) in a bid to prop up the peso. The administration of Argentine President Javier Milei has suffered a number of legislative defeats in Congress, calling into question the government's ability to pursue its austerity plans.

Investors fear those defeats mean Mr Milei's plans are at risk, putting pressure on the peso and sovereign bonds, which tumbled this week. Moreover, an unexpected defeat at local elections in the province of Buenos Aires for Mr Milei's La Libertad Avanza party sent the peso plunging 9% over the last two weeks.

Argentina's central bank sold £503m ($678m) of its reserves on Friday, £281m ($379m) on Thursday and £39m ($53m) on Wednesday.

Mr Milei accused Argentina's Peronist opposition of trying to cause "political panic" which he said was "spiralling in the market", according to the Financial Times.

Thousands of Argentines took to the streets of central Buenos Aires calling for more funding for universities and pediatric care on Wednesday.

Congress gave a green light to two bills to increase health and education budget. Those sectors have been subject to sharp spending cuts from Mr Milei's administration.

Soon after entering office in 2023 on the heels of the country's worst economic crisis in two decades, Mr Milei dissolved or defunded more than a dozen ministries as part of efforts to eliminate Argentina's monumental deficits by cutting the size of the state.

His economic reforms thrilled international investors but also depressed economic activity.

On top of his current economic woes, Mr Milei is also mired in a corruption scandal involving his sister and chief of staff. His approval ratings have tumbled as a result.

Karina Milei is accused of profiting from a bribery scheme in Argentina's disability agency. The scandal threatens to sully the government's reputation ahead of national mid-term elections at the end of October. Ms Milei denies the claims.

A former Instagram cake-baker and tarot card reader, Ms Milei managed her brother's presidential campaign before becoming general secretary.

The Buenos Aires local election was widely viewed as a political test for Mr Milei's party and a barometer as to how it will perform in the mid-terms.

Mr Milei's party secured 34% of the vote in Argentina's biggest province, losing by a landslide to the left-leaning Peronist opposition, which gained 47% of the vote.