Argentina’s annual inflation rate has hit a three-decade high, rising above 100 percent for the first time since 1991 in a sign of how the country’s government has failed to deal with the price pressures that are weighing on the economy.
Prices rose 6.6 percent in February, bringing the 12-month figure to 102.5 percent, according to Indec, the government statistics agency. This is the fastest pace since Argentina emerged from a hyperinflationary crisis in the early 1990s, and puts inflation rates among the highest in the world.
Tuesday’s data comes at a complicated time for the center-left administration of President Alberto Fernández, who is hoping to ease financial pressure on voters ahead of a tough election challenge in October.
Polls have consistently shown that inflation is the top concern among Argentines, followed by corruption and poverty.
Soaring prices have been largely attributed to a bout of central bank money-printing, as well as Russia’s war in Ukraine. The amount of money in public circulation has quadrupled during Fernández’s first three years, according to central bank data.
After the latest figures, Argentina now has one of the highest inflation rates in the world. That’s just behind Zimbabwe, Lebanon, Venezuela and Syria, all of which reported triple-digit inflation last year.
Economists have expected inflation to remain high in 2023 and are skeptical about the effectiveness of government measures to tackle it.
The country’s price control scheme known as Precios Justos, or “Fair Prices”, has temporarily frozen the cost of more than 1,700 goods until December. But it is not enough to lose the price increase due to serious imbalances in the Argentine economy. The same price controls introduced in 2021 are not enough to prevent rising prices, and consumer sentiment continues to deteriorate.
Earlier this week, the IMF urged Argentina to make stronger efforts to tackle inflation in order to maintain a $44bn program with the Washington-based lender.
The IMF has warned of “policy setbacks” in the South American country amid severe droughts that have damaged crops and damaged agricultural exports – a vital source of government revenue. Net foreign exchange reserves stood at $4.2bn in February, according to private analysts.
Buenos Aires has lobbied to lower the bar on some of the targets agreed with the IMF last year, asking the executive board to be more lenient due to the war in Ukraine and extreme weather conditions.
Argentina will receive about $5.3bn from the IMF this month, pending approval by the lender’s executive board.