He IMF warned that the dollarization of the economy, as the presidential candidate Javier Milei intends to apply, “it is not a substitute for a sustainable fiscal policy”. This was stated by the director of the Department of the Western Hemisphere of that organization, Rodrigo Valdes.
“Dollarizing is a question that markets ask themselves today more than because of size, because of the initial conditions of the amount of reserves that Argentina has. Milei touched on this topic and they have a plan that they are still working on and I would not get ahead of myself in the discussion”argued the Chilean economist.
What does Argentina need to dollarize, according to the IMF?
In his opinion, dollarizing is a mechanism that “takes time and requires a lot of political support”for which he said that if Milei wins the general elections, “he will have to seek” the support of the political leadership to apply this measure.
In an interview with the Spanish newspaper El País, Valdés considered that a dollarization program would not imply “not having a program” with the IMF. For example, he highlighted: “We have one with Ecuador, which is a dollarized country, and the last one was very successful.”
In this sense, he indicated: “For us it is essential to recognize the way a country organizes its monetary policy, its exchange policy, issues that are of full sovereignty. What does interest us is that the macroeconomic bases are in place for these systems to work in the long term and that when there are changes the transition maintains stability”.
“We work with 190 countries, with all the possible institutions that exist within them. What interests us is that they work well depending on their macroeconomic configurations,” he added.
And he also maintained: “Something very important for us is that what one does in the monetary-exchange world does not replace what is necessary to do in the fiscal world. This part requires an enormous effort from the countries and one always understands that the short term and the long term are in tension”.
According to Valdés, “all countries require a sustainable fiscal policy that leads to having debts that are not too high and dollarizing or not dollarizing is not a substitute for that task.”
On the other hand, the Monetary Fund official highlighted that this year there was a “consolidation” of the slowdown in the economies of the region when compared to 2022, despite some exceptions such as Mexico and Brazil.
However, he clarified: “We see that this slowdown in many countries is healthy because they had a very strong post-Covid takeoff and required a certain slowdown to make the next growth sustainable. Going forward, the game is yet to be played. There is clear growth, but we must work on raising that potential growth”.
“There is a regulatory issue, and stability and coherence, that must be dealt with. It is unnecessary to have risk premiums for investors because we have regulatory frameworks that are not the most appropriate. In addition, there is a security and crime issue in the region to which we must give greater importance from the point of view of macroeconomics”, he emphasized.
Source: Ambito
