Javier Milley: Controlling inflation in his country could take between 18 and 24 months (AP)

Argentina's new president, Javier Milley, faces a much more difficult economic situation than any other president in recent years.

She said many voted for Milley, who describes himself as an "anarchist capitalist" not because of his "inflammatory rhetoric", but because he comes in a desperate situation.

Argentina is in a bad situation, with annual inflation currently exceeding 140 percent and expected to reach 200 percent by early next year, while 4 out of 10 Argentines live in poverty.

Argentina's public debt is 90% relative to GDP, while the fiscal deficit is about 10% of GDP.

The newspaper pointed out that dollar bonds are traded at less than 33% of their face value, noting that the country owes the International Monetary Fund $ 44 billion, at a time when its foreign exchange reserves are about $ 10 billion, making it in the red zone.

There are at least 15 different exchange rates in Argentina, explaining that the official exchange rate is up to 354 pesos per dollar, compared to 900 on the black market.

Emergency measures

According to the newspaper, Milley's government will have to take 3 emergency economic measures.

  • First, rapid austerity to reduce fiscal deficits, and pensions and fuel subsidies are a clear area to target.
  • Second, liberalize the exchange rate regime even though this will depreciate the currency and stimulate inflation. This is inevitable because Argentina no longer has many dollars.
  • The country needs to restructure its debt to reduce it to sustainable levels, and this may require the International Monetary Fund to admit losses or impose low interest rates on loans it has made to Argentina, which represents one of the biggest mistakes in the Fund's history.

Battle of Dollarization

The newspaper also reviewed Milley's dollarization policy, noting that when a country's financial credibility deteriorates, adopting the U.S. currency instead of its local currency may make sense.

She pointed out that there are 8 countries other than the United States that adopt the dollar as legal tender, including Ecuador and Panama, but said that this step requires enough time to make the required detailed preparations and a large initial float of the dollar to support the banking system.

For its part, AFP reported that Javier Milley announced that it could take between 18 and 24 months to control inflation in his country.

"If we reduce cash issuance today, this process will take between 18 and 24 months" to "bring it back to international lows," Milley said in a radio interview.

But Milley said he had no plans to remove exchange controls immediately, as this would lead to "hyperinflation".

The president-elect reiterated his desire for the eventual abolition of Argentina's central bank, accusing the central bank of "stealing" citizens.

"Dollarization would be the way to do that. The currency will be the one that the Argentines freely choose. You're basically dollarizing to get rid of the central bank."

The president-elect did not specify a date for this anticipated "dollarization" of the country's economy.

Privatization

In his radio interview, Milley stressed that his program for the privatization of many public sector enterprises would be wide-ranging and "whatever could be in the hands of the private sector would become so."

The president-elect's desire to cut public spending raises concerns about the social impact of privatization in a country where 40 percent of the population lives below the poverty line and 51 percent of the population receives some form of social aid or support.

But Milley stressed that privatization would not affect the education and health sectors.

Source: The Economist + French