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UPDATE 2-IMF increases Argentina financing deal to $56.3 bln

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WASHINGTON/BUENOS AIRES, Oct 26 (Reuters) - The International Monetary Fund on Friday increased the size of a standby financing agreement for Argentina to about $56.3 billion, closing a deal the country has said would come with tougher fiscal measures.

Argentina’s President Mauricio Macri agreed to a $50 billion IMF deal in June, hoping it would stop a run on the country’s peso currency.

But the peso kept falling, forcing him to renegotiate the agreement. Following a meeting of the IMF’s board on Friday, the international lender issued a brief statement that did not specify the terms of the revised financing agreement.

Argentina has said the new agreement will require the government to make deeper spending cuts and increase taxes more to bring the South American nation’s primary fiscal deficit, projected at 2.7 percent of gross domestic product in 2018, to zero next year. Macri is preparing to run for a second term in late 2019.

The peso was steady following the announcement of the deal.

Cutting the deficit during a presidential election year is almost unheard of in Argentina. Wide swaths of the population have come to rely on welfare programs and subsidies that helped the country recover from a 2002 economic crisis that tossed millions of middle-class Argentines into poverty.

Macri’s popularity has fallen as he has cut pension benefits and public utility subsidies. Riot police fired rubber bullets at anti-austerity protesters in front of Congress on Wednesday as lower house lawmakers debated and then approved the government’s 2019 budget bill, which codifies fiscal targets agreed with the IMF. (Reporting by Jason Lange in Washington and Hugh Bronstein in Buenos Aires; editing by Paul Simao and Tom Brown)

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