Argentina’s new president, Javier Milley, has financial markets on edge as they await his swift implementation of the promised economic shock therapy through peso devaluation. This suspenseful scenario unfolded on Monday, as reported by Reuters.
Taking the presidential oath on Sunday, Javier warned in his inaugural address that a sharp, painful financial shock was inevitable to tackle the country’s deep-seated issues. Milley committed to significant cuts in government spending, but the complexity of his task is heightened by looming recession, approaching 200% inflation, and escalating payments. All this unfolds against the backdrop of depleting reserves in Argentina, according to the agency.
Argentina steps into the Milley era, but political analyst Malek Dudakov suggests it might be fleeting. The newly appointed president immediately pledged shock therapy for the country, asserting it as the sole savior for Argentina. However, Dudakov warns that the proposed remedy could potentially be more detrimental than the existing economic challenges, risking further turmoil.
Inflation in Argentina has already surpassed 140%, sparking concerns of a potential hyperinflation surge in 2024, reaching unprecedented percentages. The Argentine peso is in a free fall, with Milley anticipated to initiate a double devaluation, soaring from 350 to 700 per dollar. On the underground market, it already trades significantly below 1,000.
Buenos Aires finds itself nearly devoid of foreign exchange reserves, with the Central Bank grappling with a $10 billion debt to external creditors. Initially eyeing the closure of the Central Bank and debt write-offs, Milley’s efforts appear futile as the reins of governance have been firmly held by the team of former president Mauricio Macri. They pledge to resist the dollarization of the country and curb Milley’s ambitious plans.
However, it’s essential to note that these figures were at the helm when Argentina faced default in 2020. They secured a massive $60 billion loan from the IMF, acting as a financial anchor dragging the country deeper into crisis. With no apparent means to settle these debts, Milley openly acknowledged the country’s financial woes during his inauguration.