Abubakr Buleshov | 25.12.2025
Why Argentina’s Inflation Won’t Go Away
Inflation is a general increase in prices and fall in the purchasing value of money. One of the main Argentina’s issues is the persistently high self-perpetuating inflation, which has remained at extremely high levels for many years and reduces the purchasing power of households for the past 50 years. Inflation in 2023 reached 211.4%, one of the highest rates in the world and the worst in over 30 years.
1975: ~335% inflation (the “Rodrigazo” shock)
1983: ~343%
1989: ~3,080% hyperinflation
1990: ~2,314%, prices sometimes doubled in weeks
This period destroyed trust in the peso and savings.
As we could see it dates back to the 20th century showing how critical Argentina's inflation problem is. There are numerous problems behind hyperinflation and inflation in general are poverty, falling real incomes (meaning that your money buys less due to inflation outpacing wage growth, reducing purchasing power and living standards), unstable business environment (creating increased uncertainty, higher costs, competitive pressure, resource strain).
Argentina’s inflation continues to be an issue due to long-standing economic structural problems. Large fiscal deficits are often financed by printing money, increasing the money supply faster than economic output and pushing prices up. Policies in terms of controlling the currency have weakened confidence in the peso, creating black markets and encouraging businesses to raise prices in anticipation of devaluation. Repeated IMF(International Monetary Fund) bailouts highlight fiscal weakness of Argentina but frequent policy reversals reduce credibility. As a result, inflation turns into a continuous spiral, with firms and workers adjusting prices and wages based on expectations of future inflation rates. This article will elaborate over that Argentina’s inflation persists due to structural policy failures rather than temporary shocks.
The rapid growth in the money supply caused by persistent fiscal deficits is the main reason behind Argentina’s inflation. The government usually spends more than their tax revenues, thus creating large budget deficiencies. Instead of cutting their spendings, increasing taxes or issuing government bonds, Argentina had often financed these deficits by making the central bank print more money. According to the monetarist theory, when the money supply grows faster than real output, inflation is inevitable. In Argentina, this had led to more pesos chasing the same quantity of goods, increasing the price levels. Inflation expectations worsen the problem: households and firms try to spend money quickly before it loses value, further increasing demand. While money printing is the most obvious way to solve budget deficits it only offers short-term relief, in the long-term it creates instability and entrenched inflation.
1991–2001: Inflation mostly below 5%
Result of the Convertibility Plan (1 peso = 1 US dollar)
Stability came at the cost of flexibility and competitiveness.Another factor crippling Argentina’s inflation is the improper use of currency controls and the resulting distortions in exchange rates. The Argentinian government restricts access to foreign currency, particularly US dollars (also known as ‘el cepo’), therefore creating an official exchange rate alongside a black market rate known as the “blue dollar”. These controls undermine trust and confidence in the peso, encourage capital flight (the rapid flow of assets or money out of a country), and lead to import shortages, which increases production costs, creating cost-push inflation. Subsequently, businesses respond by raising prices to protect themselves against the existing currency risk. In this way, currency controls do not solve inflation; instead, serving both as a result of inflation and a contributing factor, creating a self perpetuating cycle that pushes prices up.
2002: ~41% (after peso collapse)
2010–2015: Officially ~10–15%, independent estimates put it closer to 25–30%
2018: ~47.6% 2019: ~53.8%
Money printing and fiscal deficits return.
Argentina frequently turns to the IMF for financial support in order to stabilise its struggling economy. IMF loans are typically accompanied by conditions such as spending cuts and tax increases, intended to reduce fiscal deficits and restore confidence in the currency. However, these measures are often politically unpopular within the citizens and are frequently reversed after elections, thus preventing long-term implementation. As a result, policy remains inconsistent, and businesses and households continue to expect high inflation. Not properly informing people over how these policies would help them in the long-term, creates a lack of domestic political commitment to enforce reforms, and IMF programs fail to address the underlying structural problems. This reliance on external support without credible domestic action allows inflation to persist.
2021: 50.9%
2022: 94.8%
2023: 211.4% worst since hyperinflation era
A central reason Argentina’s inflation continues is the lack of credibility in economic policies made by the government. Frequent policy reversals, defaults, and broken promises by politicians have undermined trust in both the government and the peso. Households and firms often do not trust official inflation figures, leading workers to demand higher wages and businesses to raise prices preventively, creating a wage-price spiral. In this way, inflation becomes as much psychological as economic, driven by expectations as well as actual money supply. Combined with the other structural factors - money printing to cover deficits, restrictive currency controls causing cost-push inflation, and reliance on IMF support that is often reversed, these expectations make inflation self-perpetuating, making it come back every now and so. Even when reforms are introduced, their short-term nature and lack of credibility mean that prices continue to rise. Without strong fiscal discipline, consistent monetary policy, and credible institutions, Argentina is unlikely to break this cycle. Persistent inflation erodes real incomes, destabilises the economy, and undermines confidence in the peso, demonstrating that tackling inflation requires more than temporary fixes—it requires sustained, credible economic management.
Sources:
https://www.batimes.com.ar/
https://www.worldbank.org/ext/en/home
https://www.investopedia.com/
https://www.imf.org/en/home
1975: ~335% inflation (the “Rodrigazo” shock)
1983: ~343%
1989: ~3,080% hyperinflation
1990: ~2,314%, prices sometimes doubled in weeks
This period destroyed trust in the peso and savings.
As we could see it dates back to the 20th century showing how critical Argentina's inflation problem is. There are numerous problems behind hyperinflation and inflation in general are poverty, falling real incomes (meaning that your money buys less due to inflation outpacing wage growth, reducing purchasing power and living standards), unstable business environment (creating increased uncertainty, higher costs, competitive pressure, resource strain).
Argentina’s inflation continues to be an issue due to long-standing economic structural problems. Large fiscal deficits are often financed by printing money, increasing the money supply faster than economic output and pushing prices up. Policies in terms of controlling the currency have weakened confidence in the peso, creating black markets and encouraging businesses to raise prices in anticipation of devaluation. Repeated IMF(International Monetary Fund) bailouts highlight fiscal weakness of Argentina but frequent policy reversals reduce credibility. As a result, inflation turns into a continuous spiral, with firms and workers adjusting prices and wages based on expectations of future inflation rates. This article will elaborate over that Argentina’s inflation persists due to structural policy failures rather than temporary shocks.
The rapid growth in the money supply caused by persistent fiscal deficits is the main reason behind Argentina’s inflation. The government usually spends more than their tax revenues, thus creating large budget deficiencies. Instead of cutting their spendings, increasing taxes or issuing government bonds, Argentina had often financed these deficits by making the central bank print more money. According to the monetarist theory, when the money supply grows faster than real output, inflation is inevitable. In Argentina, this had led to more pesos chasing the same quantity of goods, increasing the price levels. Inflation expectations worsen the problem: households and firms try to spend money quickly before it loses value, further increasing demand. While money printing is the most obvious way to solve budget deficits it only offers short-term relief, in the long-term it creates instability and entrenched inflation.
1991–2001: Inflation mostly below 5%
Result of the Convertibility Plan (1 peso = 1 US dollar)
Stability came at the cost of flexibility and competitiveness.Another factor crippling Argentina’s inflation is the improper use of currency controls and the resulting distortions in exchange rates. The Argentinian government restricts access to foreign currency, particularly US dollars (also known as ‘el cepo’), therefore creating an official exchange rate alongside a black market rate known as the “blue dollar”. These controls undermine trust and confidence in the peso, encourage capital flight (the rapid flow of assets or money out of a country), and lead to import shortages, which increases production costs, creating cost-push inflation. Subsequently, businesses respond by raising prices to protect themselves against the existing currency risk. In this way, currency controls do not solve inflation; instead, serving both as a result of inflation and a contributing factor, creating a self perpetuating cycle that pushes prices up.
2002: ~41% (after peso collapse)
2010–2015: Officially ~10–15%, independent estimates put it closer to 25–30%
2018: ~47.6% 2019: ~53.8%
Money printing and fiscal deficits return.
Argentina frequently turns to the IMF for financial support in order to stabilise its struggling economy. IMF loans are typically accompanied by conditions such as spending cuts and tax increases, intended to reduce fiscal deficits and restore confidence in the currency. However, these measures are often politically unpopular within the citizens and are frequently reversed after elections, thus preventing long-term implementation. As a result, policy remains inconsistent, and businesses and households continue to expect high inflation. Not properly informing people over how these policies would help them in the long-term, creates a lack of domestic political commitment to enforce reforms, and IMF programs fail to address the underlying structural problems. This reliance on external support without credible domestic action allows inflation to persist.
2021: 50.9%
2022: 94.8%
2023: 211.4% worst since hyperinflation era
A central reason Argentina’s inflation continues is the lack of credibility in economic policies made by the government. Frequent policy reversals, defaults, and broken promises by politicians have undermined trust in both the government and the peso. Households and firms often do not trust official inflation figures, leading workers to demand higher wages and businesses to raise prices preventively, creating a wage-price spiral. In this way, inflation becomes as much psychological as economic, driven by expectations as well as actual money supply. Combined with the other structural factors - money printing to cover deficits, restrictive currency controls causing cost-push inflation, and reliance on IMF support that is often reversed, these expectations make inflation self-perpetuating, making it come back every now and so. Even when reforms are introduced, their short-term nature and lack of credibility mean that prices continue to rise. Without strong fiscal discipline, consistent monetary policy, and credible institutions, Argentina is unlikely to break this cycle. Persistent inflation erodes real incomes, destabilises the economy, and undermines confidence in the peso, demonstrating that tackling inflation requires more than temporary fixes—it requires sustained, credible economic management.
Sources:
https://www.batimes.com.ar/
https://www.worldbank.org/ext/en/home
https://www.investopedia.com/
https://www.imf.org/en/home
