Red-hot inflation and a plunging peso have fueled calls for Argentina to ditch its currency. Economist Steve Hanke reiterated his view that the country should adopt the dollar as the means of exchange. “DOLLARIZATION is the only way to stop Argentina’s death spiral,” he wrote in a post on X. Loading Something is loading.
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Adopting the dollar as currency is the only way for Argentina to stop the “death spiral” engulfing its economy, according to economist Steve Hanke.
The Johns Hopkins professor echoed the views of Argentina’s presidential candidate Javier Milei – who has also called for ditching the peso and adopting the greenback as a way to tame rampant inflation in the economy.
The economic model championed by former Argentine ruler Juan Peron, and followed by later rulers, has left the economy “teetering on the brink of collapse,” Hanke wrote in a Thursday post on X. He measures the South American nation’s current annual inflation rate at more than 160%, way above the official print of 113%.
“Pres. Fernandez’s disastrous Peronista policies have left Argentina’s economy in shambles,” he wrote in a post on X on Wednesday.
“Today, I measure inflation in ARG at 166%/yr. DOLLARIZATION is the only way to stop Argentina’s death spiral.”
For months now, Hanke has been a consistent advocate of Argentina adopting the greenback. He said in July that dollarization is Argentina’s only way out of its deepening debt trap and suggested “mothballing” its central bank as well.
The Argentine peso has collapsed in value over the past decade as the nation struggled with hyperinflation and a mountain of borrowing. Its external debt ballooned to 45% of its GDP at the end of 2022, standing at $277 billion, according to CEIC data.
The currency crisis has largely been fueled by a shortage of the US dollar, forcing Argentina’s commercial banks to set up deposit accounts in the Chinese yuan.
The shortage was caused by an ongoing drought that struck the country’s agricultural exports, depleting the central bank’s dollar reserves to their lowest level since 2016.
Calls for increased use of the US dollar would undermine ‘dedollarization’ attempts by the South American nation. Argentina had previously sought to wean itself off the greenback in the same way as China, India, and Brazil have done.