Vladimir Werning, Deputy Governor of the BCRA, has presented “Argentina’s Stabilization Program: Pivoting from Controlled Demolition to Economic Reconstruction” at the US-Argentina Business Council on August 23, 2024.
PROGRAM
STABILIZATION AGENDA: A Sequential Rebalancing of Macroeconomic Policy
1 | Confronting Terminal Stage Public Sector and External Imbalances
• Root Cause Diagnosis: BCRA Financed Chronic Fiscal Deficits for Too Long
• Symptoms of Chronic Illness: BCRA Left with Too Few Assets & Too Many Liabilities
• Imminent Risk of Financial Flatline: Collapse in Money Demand was Too Close for Comfort
2 | Applying Public Sector-Led Shock Therapy
• Stage I: Delivering an Immediate Fiscal Deficit “Exit Strategy”
• Stage II: Launching an Orthodox Monetary Framework
• Stage III: Transitioning to Currency Competition & Prudent Lifting of FX Controls
3 | Reaping the Results of a Consistent Fiscal, Monetary & FX Policy Mix
• Implementing a Fiscal Shock Spares the Social Cost of Hyperinflation & Debt Default
• Tackling the Peso Overhang Collapses Inflation (Despite Initial FX & Ongoing Tariff Hikes)
• Leading Indicator Flashes a Green Light: The Economy has Turned the Corner
GROWTH AGENDA: An Ongoing Microeconomic Reform Process
4 | Tapping into Private-Sector Leverage Potential
• Re-monetization: Households are Long USD Liquidity Ahead of Tax Amnesty/Moratorium
• Re-leveraging: Strong Corporate Balance Sheets Preserve Fluid Access to External Financing
• Reinforcing Reserves: Energy Sector Structurally Strengthening the Balance of Payments
5 | Promoting a Private Sector-Led Economic Growth Recovery
• Strong Popular Mandate for Reform Despite Recession & Resistance from Political Opposition
• Focus on State Reform & Sectoral Deregulation to Boost Productivity & Profitability
