All eyes are firmly fixed on Argentina as the nation grapples with an economic crisis of epic proportions.
WorldData.info reported that a staggering inflation rate of 94.8% was recorded in Argentina for the year 2022. Throughout the extensive observation period spanning from 1980 to 2022, an average yearly inflation rate of 206.2% was computed. Cumulatively, the overall price surge amounted to a staggering 902.38 billion percent. The nation’s economy now hangs precariously on the precipice of collapse as the soaring inflation threatens to wreak havoc on its financial stability and the lives of its citizens. With the world watching, Argentina faces a critical moment, desperately in need of solutions to avert a catastrophic crash.
WHAT IS THE CAUSE OF THE FINANCIAL CRISIS?
The World Bank says that, from the 1950s until today, Argentina had more recession periods than any other country in the world. These days, things are going even worst.
The election of Alberto Fernández in 2019 triggered a significant sell-off in government bonds, eventually leading to a default by his government. In the aftermath of the default and without access to credit, Fernandez resorted to printing money during the pandemic to fund cash handouts and salary programs. Unfortunately, this action created fertile ground for an alarming surge in inflation.
Additionally, compounding Argentina’s economic woes, its foreign debt obligations skyrocketed to unsustainable levels, and as a consequence, the peso experienced a drastic collapse against the US dollar.
NATION STRUGGLING TO SURVIVE
Reading the confessions of Argentine citizens detailing how certain family members go hungry just so their children can have a meal is truly shocking. The devaluation of everything they once possessed has rendered their possessions worthless. People are struggling to make ends meet, barely managing to pay their bills. The prevailing atmosphere in Argentina has become synonymous with uncertainty. Insecurity is now a living style.
Amidst the prevailing circumstances, people in Argentina have lost faith in banks, resulting in a significant portion of their savings being stashed away in mattresses. Consequently, even a simple trip to the market for grocery shopping requires a considerable amount of pesos. As is often the case in such situations, black markets have emerged, flourishing in response to these economic challenges.
WHERE THE HOPE IS HIDING?
Argentina is in dire need of a quick change in its monetary policy as the government faces a rampant inflationary crisis that threatens the entire economy. To tackle inflation, President Alberto Fernandez’s administration, leaning left, has implemented measures like price caps, spending cuts, and increased taxes. These initial measures serve as a crucial starting point to curb inflation and establish control for the first time.
Nevertheless, this endeavor is far from simple. The measures must encompass all sectors of the economy and demonstrate resilience and conviction. The outcome of these efforts remains uncertain, and only time will reveal their efficacy.