Milei Proposes Dollarization to Combat Argentina's Persistent Inflation, But Faces Hurdles
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Argentina's new president, Javier Milei, wants to replace the Argentine peso with the U.S. dollar to address rapid inflation. This would make Argentina the largest economy to dollarize.
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The Argentine economy has struggled with high inflation for decades. Prices rise extremely fast, reducing purchasing power. Many Argentines already use dollars to preserve value.
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Dollarizing could help end reliance on the volatile peso, but risks worsening inflation if not done properly. It would also mean losing control of monetary policy.
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Milei likely lacks the political capital to push dollarization through congress. Banks may also lack enough dollar reserves to swap all pesos for dollars.
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Getting enough physical U.S. currency would be difficult. Argentina already owes the IMF billions, limiting options. The IMF says it will support efforts to curb inflation.