US Financial Expert Warns Against Risky Full Dollarization Plan in Argentina
The U.S. chairperson of the Official Monetary and Financial Institutions Forum (OMFIF), Mark Sobel, has labeled Argentinian presidential hopeful Javier Milei’s plan to fully dollarize the economy as “a far too risky gamble.”
Sobel cautioned that full dollarization without an exit strategy could potentially result in a severe economic contraction and collapse. Milei has been advocating for full dollarization as a solution to Argentina’s economic challenges, including removing local currency from circulation and abolishing the central bank. However, Sobel emphasized that while dollarization could curb officials’ discretion in currency management, it presents its own set of challenges.
He pointed to the example of the convertibility plan, a currency board, that contributed to Argentina’s economic troubles in the past, including a soaring current account deficit and rising unemployment. He warned that a similar lack of an exit policy for dollarization could lead to significant economic consequences. Sobel emphasized the need for sweeping fiscal consolidation and extensive liberalization to address Argentina’s financial instability and to pave the way for a more sustainable economic future.
Clever Robot News Desk 22nd August 2023
