BUENOS AIRES, Argentina (AP) — After lifting currency restrictions and free-floating the peso in December, the focus of Argentina’s government will now be on fighting inflation, Finance Minister Alfonso Prat-Gay said Thursday.
“To control price expectations is the government’s biggest worry,” Prat-Gay said, adding that it will not be easy given the state the economy.
Annual inflation is expected to reach 25 percent in 2016. He said the government hopes to have inflation slowed to 5 percent by 2019.
Prat-Gay recognized that an obstacle to reducing inflation will be the government’s own plan to end subsidies on electricity and gas consumption, which will cause prices to go up. The subsidies, a mark of the previous administration of President Cristina Fernandez, helped lift the country’s fiscal deficit to a 30-year high, he said.
“Some prices will go up because they have not been adjusted for 10 years,” said Prat-Gay. But he added that he is confident the inflation targets announced by the government are adjusted to absorb the shock of these relative price hikes.
Prat-Gay didn’t provide details on how the government will phase them out, but he said the subsidies have also been financing the bills of “30 percent to 40 percent of the richest Argentines.”
Argentina’s finance minister blamed inflation and a soaring deficit on Fernandez’s government, and said the country’s fiscal deficit will be cut by a point in 2016 and be close to zero when Macri’s term end.
In a bid to restore credibility, Argentina will use a price index calculated by the Buenos Aires bureau of statistics while it reforms the Indec, the country’s national statistics bureau, which suffered an intervention in 2011. Two years later, Argentina received a “motion of censor” from the International Monetary Fund for failing to release accurate inflation data.