Argentina’s right-wing populist, economically liberal President Javier Milei has now been in office for around six months. In a country long mired in economic turmoil, his radical economic plans appealed to voters during the election campaign and has had some success in bringing down the high inflation to under 5%.
The long-term success of Milei’s plan hinges on his ability to sustain fiscal surpluses. Fiscal surpluses were primarily achieved through cuts in government spending, delaying transfers and slashing the real value.
The fiscal and inflation numbers have looked much better over the first three months of Milei’s government. A closer examination of how these numbers were achieved, however, raises concerns about their medium- and long-term sustainability.
The average salary of Argentinians has gone below the poverty line and the devaluation has made exports more competitive at the cost of expensive imports.
The most efficient way out is to implement a concrete monetary reform that will produce positive economic shocks. It can pave way for a consistent fiscal restraint and a more balanced budget.
