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Gita Gopinath, number 2 of the IMF, questioned Javier Milei’s dollarization plan: It does not solve the problems

The economist stated that the economy inherited by the current Government was “close to a crisis” and required “bold and decisive action.” Gopinath praised Javier Milei and his economic program for the “fiscal anchor” and the elimination of monetary financing to the Treasury, which was “missing in previous programs.” His statements were made to Diario La Nación in the offices that the organization has in the country.

Gopinath ruled out a new program with fresh funds with Milei and the economic team, a possibility that the Government keeps in the pipeline. That conversation, he maintains, is “preliminary.”

Inflation, what does the 2nd of the IMF think?

“It starts with double digits, then high single digits, and then it comes out something lower than single digits. But I think that it will take at least a year to bring inflation down to low levels and then maintaining it at those levels until 2025 also requires efforts,” he says. He thinks he may be in a digit in the middle of this year.

Gopinath emphasizes that it is important that the cost of the adjustment be shared among the entire society, and he even made it known through the official statement of his visit. For this reason, he advised two things: ensure that pensions and social assistance follow inflation and that the collection comes from “a better income tax.” The former Harvard professor also suggests eliminate tax expenses and privileges to certain regions that are not needed.


Gita Gopinath highlighted the fiscal anchor carried out by Luis Caputo


Dollar and end of the stocks

For the Fund official, it is necessary to provide more clarity on monetary policy and the exchange rate regime. About him crawling peg, He explained that it is something that “must be calibrated over time” – he assures – based on inflation and reserves.

For the former chief economist of the Fund, a figure close to the US government, the elimination of the stocks has no date: It depends, rather, on certain conditions. He believes that negative interest rates help fiscal adjustment today, but that over time they will have to return to positive territory to support the demand for pesos and that, to sustain any stabilization over time, structural reforms will be necessary (he mentions labor reforms). Without this, there will be no stimulus to grow and stability will once again be at stake.

“What type of monetary regime a country has is a sovereign decision”, he says and adds that, for any monetary regime, including dollarization, preconditions are needed: a sufficient amount of dollars in the Central Bank and good macro policy frameworks. “What we see, from the experience of other countries, is that dollarization does not solve all the problems,” says Gopinath, who adds that, without fiscal discipline, even if it is dollarized, we can still have problems. “It is not a panacea,” he concludes.

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