After meeting with the head of the International Monetary Fund at the G7 summit in Italy, Javier Milei had a heated confrontation with a senior official, Kristalina Georgieva. In an interview with Radio Miter from the Czech Republic, Milei harshly criticized Rodrigo Valdés, the director of the Western Hemisphere, for allowing an exponential increase in Argentina’s Central Bank’s debt under previous management.
Tensions had been simmering for some time. During his last visit to Argentina in March, Valdés praised the “impressive progress” reflected in the fiscal surplus, drop in inflation and reduction of exchange gap. However, he also warned about the need to improve “the quality of fiscal adjustment” and carefully calibrate the exit from quantitative easing.
The recommendations included alerts for the “fragility” of reserves and rising exchange gap, which exceeded 50% this week with the blue dollar at $1,365. Moreover, according to Equilibra, The Fund placed equilibrium exchange rate at end of May around $1150 – 30% higher than current value.
On Wall Street, they believe that flat dollar has become a “trap”: if government accelerates it, inflation increases and if it maintains it then runs risk of widening reserve gap causing currency run and increasing debt even more. The Central Bank lost US$240 million yesterday during peak agricultural liquidations amid difficulties taking on debt in dollars (Bopreal).
These complications arise as government seeks to start new program after six months negotiations to obtain US$15 billion and lift stocks. Another factor adding tension is roadmap towards currency competition regime like Peru and Uruguay. Government attributed rise in Country Risk and free dollar to Bases Law but lack of precision of this correlation between stocks and fixed exchange rate at 2% monthly new monetary regime which they cannot implement close to 2025 elections.
