In 2020, the BCRA provided 7.3% of GDP to the government. At that time, many economists warned that issuing large currencies in the short term was dangerous and that prices would rise in the near future. However, due to the collapse of economic activity and the growing demand for prevention funds, the impact decreased in the short term, and the inflation rate was only 36.1%.
In 2021, the situation was different: the government continued to raise funds from the Treasury through issuance, in this case it reached 4.6% of GDP, and the recovery of economic activity and the decline in demand for funds played an important role. The inflation rate was closed by more than 50%. The problem is not only in numbers, but also due to the economic populism that the government adopted last year to increase the score in the legislative elections, the relative price adjustment has been postponed until this year. That is, by 2022, it will not only adjust inflation for gasoline, tariffs, advanced, telecommunications, etc. this year, but also do what the government did not want last year.
That is why the monthly inflation rate is 4.7%, and it seems to be lower than in March due to the increase in the number of schools and the regulated price adjustment (as mentioned in the previous paragraph), so inflation this year is close to 60% instead of 50%.
To implement a serious anti-inflation plan, it is necessary to reduce the dependence of the Ministry of Finance on BCRA. Without this freedom, any plan would be unreliable. The previous government had to learn that Friedrich Sterlinger's BCRA strengthened monetary policy by raising interest rates. On the other hand, the fiscal deficit not only did not decrease, but also added a mistake, which was evident among economists at the time.
Now, how can this government close a fiscal loophole of about 3.5% of GDP? Of course, the measures to be taken were not welcome: more than one member of the government, especially those related to the Vice President, knew this, and the vote on the parliamentary agreement began to reflect laughter.
Despite what Martín Guzmán said in the IMF agreement, Argentina will not return to the path of sustained economic growth. The reason is simple. Nowadays, the rules of the game stipulate that there are no rules. One day, the withholding tax was 31%, and the next day the withholding tax was raised by 2 percentage points due to the suspension of export registration.One day, the government imposed price control on the products it sells and announced that all the products sold were lost. As a result, there are no countries that can create jobs even if they achieve the fund's goals. In this regard, reaching an agreement with the IMF was not a necessary but sufficient condition for Argentina to solve the problem.
Without structural reforms, the rules of the game will not change, and Argentina will continue to move forward with a permanent economic crisis. The war decision put forward by the president smells more than a serious plan for price control and tightening new rules. Then today's bread, tomorrow will be hungry.