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Dollarisation: Argentina's Milei informs IMF how he wants to divorce peso, adopt dollar

Dollarisation: Argentina's Milei informs IMF how he wants to divorce peso, adopt dollar


It is in complete contrast to Brazil’s Lula who stands for de-dollarisation

LONDON (Web Desk/Reuters) – There are people like Brazil President Luiz Inacio Lula da Silva – commonly known as Lula – who are openly opposing the domination of US dollar and calling for introduction of a new currency in South America. But there are also the likes of Javier Milei, Argentina's surprise presidential front-runner, who has pledged to eventually scrap his country’s central bank and replace the embattled peso with the US dollar.

The contrast in views can never be clear between the two as they are from two neighbours football-crazy nations with a strong rivalry: Lula is from Brazil, Milei is from Argentina; Lula represents the Left, Milei is a radical libertarian; Lula is against the international financial institutions’ polices, Milei wants to please the International Monetary Fund (IMF).

Meanwhile, we in Pakistan too have a school of thought represented by the likes of Miftah Ismail, which thinks that the funding allocated for the state-run schools should be diverted to families and the IMF conditions are best thing ever one could expect.

And in a latest report, Reuters reported while quoting sources that Milei pitched models of dollarizing the South American country's economy in a meeting with major lender the IMF on Friday, two sources said.

The meeting, confirmed by both sides, comes as the lender looks to better understand the dark horse candidate who came top in a shock primary election last week and his potential policies, which could impact the country's $44 billion IMF loan deal.

Milei – who got 30 per cent of the primary vote, ahead of the ruling Peronist coalition on 27pc and the main conservative opposition bloc on 28pc – has pledged to eventually scrap the central bank and replace the embattled peso currency with the US dollar.

Milei, 52, outlined his economic proposals and told IMF representatives that his teams is working on "different models of dollarization," said two sources close to the candidate with direct knowledge of the meeting who asked not to be named.

In the 80-minute meeting, he also told IMF officials that he does not intend to default to the fund or to bondholders, one of the sources added. The IMF was keen to learn further details on Milei's dollarization plans, one source said.

A spokesperson for the IMF said the discussion with Milei and his team "was an opportunity to exchange views on the current economic outlook for Argentina and learn more about his economic policy priorities."

Milei attended the talks with economic advisers Carlos Rodriguez, Roque Fernandez and Dario Epstein. IMF officials included the director of the Fund's Western Hemisphere Department Rodrigo Valdes and deputy director Luis Cubeddu.

Milei's spokesperson said that the candidate outlined his economic program, including plans for fiscal deficit reduction, opening up the economy, unifying the country's wide array of currency exchange rates and introducing monetary reform that would eventually lead to the central bank being scrapped.

The primary election won by Milei is seen as a good gauge of how voting will go in the Oct. 22 general election, when Argentina chooses its president, vice president, members of congress and the governors of some provinces.

The surprise result sparked turmoil in the country's bond and currency markets earlier this week, leading the central bank to hike interest rates by 21 percentage points to 118pc and the authorities to devalue the currency peg by 18pc.

The IMF's executive board will meet next week to discuss a $7.5bn disbursement to Argentina after it reached a staff level agreement on two combined program reviews in July. The country's net foreign currency reserves are below zero.