Javier Milei, announced this Sunday, in his first speech as head of state, that he will apply a hard fit and that there will be “stagflation” for several months, but promised that this will be the “last bad drink” before the “reconstruction” of the country.
“Unfortunately, I have to say it again: there’s no money. The conclusion is that there is no alternative to adjustment and there is no alternative to ‘shock’“Milei stated when speaking to a crowd at the doors of the Argentine Congress palace after taking office.
There is no alternative to adjustment
‘Shock’ plan
The president admitted that the ‘shock’ plan that he will apply will have a negative impact on the level of activity, employment, real wages and the rate of poverty and indigence.
There will be stagflation but it is not very different from what has happened in the last two years
Milei assured that the “inheritance“What Kirchnerism leaves behind is the worst that an Argentine government has ever received, with a financial and fiscal deficit equivalent to 17% of GDP, inflation that grows at an annual rate of 300%paralyzed economic activity, a poverty rate of Four. Five% and a poverty rate close to 10%.
He ratified that he will apply a fiscal adjustment of 5% of GDP which, he promised, will fall “almost entirely” on the State and not on the private sector.
It will “clean up” the liabilities of the Central Bank
He also confirmed that he will “clean up” the Central Bank’s liabilities and put an end to monetary issuance, which, he insisted, is the cause of Argentina’s high inflation.
But he stated that monetary policy acts with a lag of between 18 and 24 monthsfor which he anticipated that inflation will remain high, and cited forecasts from private entities that foresee monthly rates of between 20 and 40% between this month of December and next February.
Delicate fiscal and monetary scenario
Milei painted a delicate fiscal and monetary scenario that, in his assessment, places Argentina on the verge of hyperinflation, which could reach 15,000% annually. “This is the legacy they leave us: a planted inflation of 15,000% annuallywhich we are going to fight tooth and nail to eradicate,” he promised.
This is the inheritance they leave us
“It is our top priority to make all efforts possible to avoid such catastrophewhich would take poverty above the 90% and destitution above the fifty%“he insisted.
“Macroeconomic adjustment”
Milei also warned of the “inheritance” in terms of debt: 30 billion dollars of debt with importers; 10,000 million of profits retained from foreign companies as profit transfers; 25,000 million of Central Bank debt; and 35,000 million of Treasury debt.
“The bomb in terms of debt amounts to 100,000 million dollars, which will have to be added to the nearly 420,000 million of already existing debt,” he warned.
Added to these are the maturities in 2024 of sovereign debt issued in pesos for the equivalent of about 90,000 million dollars, plus maturities with multilateral organizations for 25,000 million.
“With closed financial markets and the agreement with the International Monetary Fund fallen due to the brutal defaults of the outgoing government, the ‘roll over’ of debt is extremely challenging,” he warned.
Despite the tremendous panorama described, Milei said that, after the “macroeconomic adjustment“, the situation in Argentina will begin to get “better.” “There will be light at the end of the road,” he promised.