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With a turbulent outlook, the third largest economy in Latin America registered year-on-year inflation of 71% in July. Entering the second half of the year, experts assured that the country could end 2022 with inflationary figures that even exceed 100%, a scenario to which is added a debt with the International Monetary Fund, a shortage of foreign currency and constant demonstrations of a population that demands from the Executive a better fiscal management.
Argentina occupies the first positions of the countries of the continent with the highest inflation, a situation that has been occurring in the South American country for months and that has begun to generate fears of an economic recession.
According to the National Institute of Statistics and Censuses of Argentina (INDEC), the intermonthly Consumer Price Index (CPI) in July was 7.4%, the highest figure in 40 years and in the last 12 months it recorded the highest figure of 71%, one of the highest in the world.
Its citizens, mainly in the capital, have repeatedly organized massive protests in the form of criticism of the management of the Government of Alberto Fernández and many others seek help from human rights organizations denouncing the lack of food or the extreme increase in prices of food. the most basic products.
But the negative outlook does not end there. With a debt with the International Monetary Fund (IMF) of 44,000 million dollars, constant cuts in fiscal investment for Argentines and with the complicated goal of reducing the fiscal deficit to 2.5% of the Gross Domestic Product (GDP).l, economic analysts predict that the country could end the year with inflation around 90% or even more than 100%.
In practice, this means that the country will have to reduce by 0.5% the primary fiscal deficit that it reached in 2021 (which was 3% of GDP).
According to the economist Miguel Boggiano, Director of Carta Financiera, in an interview for France 24 in Spanish, it is a difficult task to achieve. “It’s almost double the Treasury deficit, it’s brutal, I really don’t imagine how that 2.5% goal can be met, there is no way to meet it, at the risk that the IMF is as trapped as Argentina, it lent more than it I had to and here we are”.
The exchange trap and the shortage of foreign currency
Another of the scourges that are added to the situation is the exchange rate, as this determines the restrictions on the purchase of a currency from another country, a measure that comes from the fear that excessive demand could cause the local currency to depreciate. , generating more inflation.
In July, Argentina increased this stock for trips and purchases abroad, that is to say that the stock reaches the consumption of foreign currency for travel and credit card expenses outside Argentina and what translates to an additional cost of 45% must be added to each purchase.
“The exchange rate is close to coming to an end due to exhaustion, the Central Bank has no reserves, the system’s deposits are being used for those who have access to dollars and the gap is greater than 6%, they are going to have to release the rate of change, which supposes jump in prices. It’s that, or run the risk of ending the mandate,” Boggiano told France 24.
The Argentine Ministry of Economy assured at the beginning of August that it was “deeply necessary” for the country to increase its dollar reserves by increasing exports, mainly agricultural products, and proposed a plan to talk with the peasants to achieve it as soon as possible. .
Argentina recently began to make cuts in the subsidies that Argentines had for their electricity, gas and water bills while the Executive seeks to have savings to pay the debt with the international issuer.
Meanwhile, Sergio Massa, the third economy minister appointed in less than a month, is holding meetings with the IMF ahead of the periodic review of Argentina’s $44 billion debt deal signed in March and in September the Head of the economic portfolio defines the new disbursements with the lender.
With AP, EFE and Reuters
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