First month of Milei's government in Argentina is marked by 211% inflation and economic package

While the president of Argentina, Javier Milei, completes his first month in government with the proposal to combat hyperinflation in the country, the official inflation index for 2023, published this Thursday (11), reached 211%, the highest level since 1990 .

In his first days in office, Milei presented a package with several strict austerity measures to curb the rise in prices.

Following the release of last year's inflation rate, Argentina's central bank announced that it will put 10,000 and 20,000 peso notes into circulation later this year.

+ Barbecue is off the menu in Argentina with high inflation

According to official data, Argentina's monthly inflation rate reached 25.5% in December, slightly below forecasts, following a strong devaluation of the peso by Milei's government. The 2023 data saw Argentina overtake Venezuela, which for a long time was the outlier in Latin America in terms of price increases.

One of the main slogans of the ultraliberal president's campaign was to control inflation, reduce a deep fiscal deficit and rebuild the government's coffers. However, Milei warned that this will take time and that things could get worse before they get better. Many Argentines are reducing spending even further, with two-fifths already in poverty.

Market action

Argentine markets, which soared after Milei took office, are now giving the libertarian leader a dose of reality, with bond prices falling, the peso weakening again and investors wary of new government debt auctions.

The cold shower from investors, after an initial honeymoon, highlights the enormous challenge that Milei faces in trying to contain inflation, avoid social unrest, and rebuild the country's reserves.

This week, Argentina and the International Monetary Fund (IMF) reached an agreement at a technical level on the seventh review of the country's US$44 billion program and could unlock a disbursement of around US$4.7 billion.

“Understandings have been reached on a strengthened set of policies to restore macroeconomic stability and put the current program back on track,” the IMF said. “The program has gone seriously astray,” the Fund added.