The Peronist government of President Alberto Fernandez has once again taken measures that have aggravated the crisis that has been plaguing Argentina and its long-suffering voters. Even though the country’s economy is already in negative growth territory, interest rates have been raised further. This decision appears puzzling since public debt is already at 90% of GDP and rising interest rates can only make the situation worse.
The situation is further complicated by the fact that Argentina’s debt and deficit levels are already at a high threshold. This means that rising interest rates may not be enough to persuade currency holders to keep their rates. Instead, it could lead to more problems for those who have not yet totally extricated themselves from the peso.
While Argentina’s troubles have largely been self-inflicted, high grain and energy prices over the last 15 months have made the situation more challenging. The only way for the government to resolve this crisis is to persuade its creditors, including the IMF and the People’s Bank of China, to stop applying more policy tricks. Instead, they should offer a line of credit to the country.
In light of these challenges, it is essential to find a practical solution that will not make the situation worse. The government must work to stabilize the economy and provide strategies for sustainable growth. With the help of its creditors, it is possible for Argentina to rebound from this crisis and start making progress.
Michael Kuczynski, from Pembroke College at the University of Cambridge, believes that resolving the crisis must be the government’s top priority. With decisive action and a pragmatic approach to debt management, Argentina can create a brighter future for its people.