Buenos Aires, Argentina — A closely watched measure of inflation in Argentina remained stronger than the libertarian government of President Javier Milei would have expected on Friday, when the official statistics agency reported that prices rose slightly in June and broke a streak of declines of a month.
Argentina’s consumer price index rose 4.6% in June, slightly up from 4.2% in May, ending a five-month streak. inflation cooling trend which experts had attributed to a deepening recession caused by Milei’s brutal austerity plan. President Milei has touted the drop in prices in recent months as a key victory in his fight against Argentina’s worst economic crisis in more than two decades.
When Milei assumed the presidency last December, monthly inflation reached a maximum of 25%. But the drop in prices since then has not offered much relief to ordinary Argentines as Milei presses ahead with a harsh austerity program. which means cutting generous energy subsidieseliminating price controls and devalue the Argentine peso.
Friday’s government report showed Argentina’s annual inflation slowing down a little to just over 271%, still among the highest rates in the world.
Rising electricity and gas prices accounted for most of June’s inflation surge, the statistics agency said. Argentines have reported exorbitant utility bills after years of paying highly subsidized rates under leftist governments.
In stark contrast to Milei’s program, those past Peronist administrations It fixed prices and printed billions of dollars in pesos to finance a large deficit, fueling chronically high inflation.
Under Milei, Argentina’s Energy Ministry reported last month that low-income households that previously paid only 5% of the actual cost of electricity have started paying a third of it, while middle-income households now cover at least half after the elimination of subsidies by Milei. The government has also limited electricity consumption to qualify for subsidies, squeezing families as Cold front sweeps Argentina during the southern hemisphere winter.
The country’s cost of living rose nearly 80% in the first five months of 2024 compared to the same period last year, the report also showed. Prices in Buenos Aires stores and restaurants have reached levels comparable to those in the United States, even as salaries and public pensions have remained low.
In other worrying news for Milei, the peso fell to another historic low against the dollar on Friday, reaching 1,500 on the black market after months of stability.
The sharp drop in the Argentine currency means that the gap between the black market exchange rate and the official exchange rate, currently 919 pesos per dollar, has widened to more than 50%. That complicates Milei’s goal of eventually lifting Argentina’s strict currency controls to restore investor confidence.
Milei’s government wants the International Monetary Fund (to which Argentina already owes a staggering $44 billion) to step in with a new loan to support its plans to remove capital controls.
But as uncertainty persists over the future of Milei’s economic program, the IMF lowered expectations for a new deal on Thursday.
“Staff will engage in discussions about a possible new agreement as we would with any member of the IMF,” fund spokeswoman Julie Kozack told reporters Thursday. “At this stage, there is no specific timeline for those discussions.”
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