IMF has formally
censured Argentina for understating the rate of inflation since 2007 in order
to keep interest payments on its debt low. Analysts believe inflation could be
as high as 30% by the end of the year, although the government stated that inflation
was below 11%. If Argentina does not improve the quality of its statistics
before September, it could potentially face being excluded from taking part in
the IMF decisions later this year. On top of facing potential sanctions,
Argentinians are already facing the effects of this higher inflation in their
everyday lives. To address the problem (or diminish the effect of the economic
crisis in society) two-thirds of its supermarkets agreed to keep prices steady
until the first of April. It is time, therefore, for the government to stop
trying “cheat the system” and address the inflation problem to bring the
economy back to normality.
It is certainly not in Argentina's interest to become excluded from taking part in the IMF's decisions. It is also vital for the country to curb the rapidly rising inflation rate.
ReplyDeleteHowever, I'm not certain if a price freeze is a suitable solution to the problem. While it is a tempting short term solution, price freezes can cause dangerous shortages in the longer term. Hopefully, Argentina will be able to devise a more sustainable solution to the inflation problem.