Argentina’s inflation rate tops 100% for the first time in three decades

Argentina’s annual inflation rate has hit a three-decade high and has risen above 100 percent for the first time since 1991, a sign that the country’s government has failed to tame the price pressures that have gripped the economy.

According to Indec, the state statistics agency, prices rose 6.6 percent in February, bringing the 12-month reading to 102.5 percent. That was the fastest pace since Argentina emerged from a hyperinflationary crisis in the early 1990s, when its inflation rate is among the highest in the world.

Tuesday’s data comes at a difficult time for President Alberto Fernández’s centre-left government, which had hoped to ease financial pressures on voters ahead of a difficult electoral challenge in October.

Polls have consistently shown that inflation is a top concern for Argentines, followed by corruption and poverty.

The rising prices were largely attributed to a bout of central bank money printing and Russia’s war in Ukraine. According to the central bank, the amount of money in public circulation has quadrupled during Fernández’s first three years in office.

According to the latest figures, Argentina now has one of the highest inflation rates in the world. It trails only Zimbabwe, Lebanon, Venezuela and Syria, all of which reported triple-digit inflation last year.

Economists had widely expected inflation to remain stubbornly high throughout 2023 and are skeptical about the effectiveness of government action to contain it.

A government price control system called Precios Justos, or “fair prices,” has temporarily frozen the cost of more than 1,700 goods until December. However, given the serious imbalances in Argentina’s economy, this was not enough to dampen price increases. Similar price controls introduced in 2021 were not enough to halt price increases and consumer sentiment has continued to deteriorate.

Earlier this week, the IMF urged Argentina to step up its anti-inflation efforts to keep its $44 billion program with the Washington-based lender on track.

The IMF warned of “political backlash” in the South American country amid a severe drought that has destroyed crops and hit agricultural exports – a key source of government revenue. According to private analysts, net foreign exchange reserves hovered around USD 4.2 billion in February.

Buenos Aires has campaigned to lower the bar on several targets agreed with the IMF last year, urging the board to be more lenient amid war in Ukraine and extreme weather conditions.

Argentina is due to receive around $5.3 billion from the IMF this month, subject to approval by the lender’s board.