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Association of international banks calculated how many dollars Javier Milei needs to open the exchange rate

Association of international banks calculated how many dollars Javier Milei needs to open the exchange rate

“We estimate that full liberalization of the foreign exchange market, which should pave the way for a recovery in growth, would require an additional $10 billion in reserves,” the IIF said in a report.

The influential association of global banks International Institute of Finance (IIF) published a report on the Argentine economy, in which analyzed the first months of Javier Milei’s government, and estimated that to get out of the exchange rate trap he will need another US$10,000 million.

The analysis, by Martín Castellano, head of Research for Latin America, considered what he described as “shock therapy” that was based on fiscal austerity, monetary tightening and greater liberalization to stabilize the economy.

In addition, The IIF warned about the need to advance reforms to consolidate fiscal adjustment without losing sight of the challenging political context that Milei faces when promoting these changes.

With fewer regulations, in the first five months of Javier Milei’s government the Central Bank managed to accumulate reserves of about US$12,000 million. But according to the institute, another US$10 billion is required to be able to lift the exchange rate.

In the Government’s vision, and using the President’s own words, when that happens “the economy is going to rise like a diver’s fart.” Milei had estimated that the release of the stocks could occur at the beginning of the second half of the year. We will see.

“We estimate that full liberalization of the foreign exchange market, which should pave the way for a recovery in growth, would require an additional $10 billion in reserves.”Castellanos calculated.

And he also spoke of the support of the Monetary Fund for Argentina. “The IMF has supported the Government’s program, agreeing with the ambitious fiscal consolidation plan, despite its concern about the quality and sustainability of the spending adjustment. (but) I would like to see more progress before committing additional funds, including greater clarity in the monetary policy framework and broader political support,” he considered.

The paper highlights that the adjustment of spending and the lower monetary issue contributed to reducing the deficit and inflation, although it pointed out the effects on economic activity. It also warns of greater social conflict due to the effects of the crisis, but highlights that Milei maintains high rates of popular support.

For Castellano and his collaborators, he considered that a rapid fall in inflation in the coming months that improves purchasing power and avoids an appreciation of the real exchange rate is key to maintaining the stability of the foreign exchange market and continuing to accumulate reserves.

Source: Ambito

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