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NEW YORK (Reuters) -Argentina’s Economy Minister Sergio Massa pledged on Tuesday to unleash “all tools” to counter a slide in the peso currency that President Alberto Fernandez blamed on “Argentina’s right”, as the currency hit a fresh low in popular black markets.

The peso hit 495 against the dollar in informal markets that have flourished as the official foreign exchange market is under tight controls.

The 6.7% plunge on Tuesday to a 490 close was the steepest daily drop since November 2020. The official peso, in a sliding peg to the dollar, has fallen 20% so far this year. The gap between the black and official rates of some 122% is the widest since July.

The slump has pressured Fernandez’s government to devalue the currency, something he has long resisted, and forced the central bank to increase intervention in the FX market.

“The current FX policy is unsustainable,” said Ted Pincus at Swiss hedge fund Mangart Capital. “Argentina is delaying an inevitable devaluation and wasting precious resources in the process.”

Devaluing the currency could help reduce the trade deficit in part by boosting exports, including of grains, a sector which already has a preferential exchange.

However it would also slash the real value of people’s savings and put pressure on local prices, especially of imported goods, further lifting inflation already running above 100%.

Last week, Argentina’s central bank raised its benchmark interest rate by 300 basis points to 81% after inflation in March rose at its fastest monthly pace in two decades.

Savings and salaries are being “destroyed” by the spike in the dollar, said Diego Traverso, a systems engineer. “The scheduled raises fell overboard. In the last 24 hours everything fell apart.”

Minister Massa vowed to put in order an “atypical situation” related to what he described as “rumors and false reports” weighing on financial instruments linked to the dollar, without specifying what those reports were.

President Fernandez, who said last week he will not run for re-election in October, blamed Argentina’s right, saying without naming anyone that “they have always gone abroad to speak out against the popular governments, always, and they are doing it again.”

MARKET VS. ECONOMY

The local stock market benchmark closed at a record high on Tuesday, up 50% year-to-date, partly boosted by investors buying stocks as an inflation hedge. The fraction that trade in dollars indexed by MSCI is up 7.9% on the year.

Argentina’s indexed spread to U.S. Treasuries tightened a few basis points, but with bonds trading near record lows around 20 cents on the dollar, the South American country has no access to global debt markets.

Meanwhile, data over the past week showed the economy continues to be pummeled even beyond the historic drought that has hit key grains exports, fueling the shortage of foreign currency.

JPMorgan (NYSE:JPM) and Goldman Sachs (NYSE:GS) see the slowdown persisting in the months ahead.

“Going forward, the scenario appears very challenging,” JPMorgan analysts said in a client note on Tuesday.

“The severe drought affecting crop production, on top of rising parallel FX pressures amid political uncertainty are to prove a drag on economic activity in the coming months.”

Economic activity is set to contract 2.3% this year, the worst performance among the G20 countries, with inflation seen ending the year above 100%, according to median estimates from economists polled earlier this month.

Argentina’s economy has struggled to build dollar reserves as its agriculture exports have dropped, to the point that the International Monetary Fund (IMF) lowered an already low bar for reserves set as part of a $44 billion financing program.

Massa said on Tuesday the government is looking to further revise terms of its IMF program. The IMF said talks were “progressing constructively”.

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