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With year-on-year inflation that has reached levels of 109% and the nervousness generated by the fall in its dollar reserves, Argentina launched a package of measures to stop the strong impact of price increases on consumers.
The Argentine Ministry of Economy announced on Sunday, May 14, a package of shock measures to deal with rising inflation that has accumulated three months in triple digits.
The first one has to do with a new reference interest rate adjustment which raised it to 97% per year. Just two weeks ago interest had already risen from 81% to 91%.
Also part of the emergency measures is a greater intervention of the exchange market by the Central Bankwhile looking for accelerate agreements with the International Monetary Fund (IMF)so that they allow the country to have more resources to face the situation.
One of the objectives is to confront speculation and abuses by companies due to their dominant position, for which the Government said that it will implement actions ranging from the creation of a unit for the analysis of trade operations to new powers for the Central Market to import in directly products without tariffs.
I also know they would suspend the ‘antidumping’ duties in some branches of products in order to reduce the price of imports and encourage competition. They will be implemented, according to the Executive, Tax relief for micro, medium and small businesses for the payment of debts.
Argentina’s inflation rate has accelerated more sharply over the past year despite price controls and tariff regulations, raising fears of a possible return of the specter of hyperinflation, similar to the one that plagued the country a little over 30 years ago.
The Government of Alberto Fernández also faces the risks of a greater devaluation, which would aggravate the problem of price increases in the family basket for millions of Argentines. This poses a dilemma between how to tame inflation and avoid a currency crash, while protecting the bank’s meager foreign currency reserves.
Markets are closely watching political developments as Argentina heads towards general elections in October, as well as negotiations with the IMF to reschedule disbursements of the $44 billion loan received last year following a refinancing.
With EFE and Reuters
