MercoPress. South Atlantic News Agency

Kirchner top official admits Argentine double digit inflation

Argentine Central Bank President Martin Redrado said the bank is “deeply concerned” about the country's inflation rate, the strongest statement so far from a member of the President Kirchner administration.

"The central bank is concerned, deeply concerned, about the current level of inflation" Redrado said Thursday in a speech at the Argentina Investment Forum in London. "There is no room for complacency. We must continue with a coordinated effort in fiscal, salary, monetary and competition policies to ensure fast and sustained advances in the coming years". Consumer prices in Argentina rose 8.7% last month from the same period a year earlier, the third-fastest rate reported in South America after Venezuela and Uruguay, the National Statistics Institute said September 6 in Buenos Aires. However many private analysts and recordings in "non-K" provinces show that the consumer prices index is closer to 15%. Next year's budget is based on the assumption of an inflation rate ranging 7 to 8%. President Nestor Kirchner has tried to stem inflation by limiting exports of beef and wheat to keep domestic prices down, reaching price accords with companies and maintaining a freeze on electricity-rate increases. In January, Kirchner replaced the official in charge of calculating inflation, leading to accusations of manipulation. Kirchner and Economy Minister Miguel Peirano have denied any manipulation. Kirchner said on September 6 that "everyone knows" the country's inflation figures are credible. However earlier this week Federal Judge Rodolfo Canicoba Corral ordered a team of independent experts to recalculate this year's inflation reports, the results of which could allow holders of inflation-linked debt to legally challenge the official data, El Cronista newspaper reported, citing an interview with Corral. Miguel Kiguel, a former undersecretary of finance who directs Econviews, a consulting company in Buenos Aires, said August 29 that Argentina's annual inflation rate may be as high as 17%. "We are on the edge of a situation where things can get out of control" said Silvia Marengo, who manages 130 million US dollars in emerging market bonds at Clariden Leu in London. "They should pay attention and do something. They can only manipulate the numbers for so long". Redrado pointed out that sustainable growth can only be achieved if a compromise is reached between the different actors to increase the budget primary surplus. Argentina is holding elections next October and government spending has substantially eroded the budget primary surplus. "The consolidated primary budget reached an exceptional 5.3% in 2004 but has since dropped to 2%. From now on a commitment to increase the primary surplus is essential to ensure sustained growth in the coming years", he emphasized. "The need to preserve and increase these surpluses is a priority since we are still in the transition period typical of those following crisis", he added. Since 2001/2002 when Argentina defaulted on 100 billion US dollars sovereign debt, the country has had a spectacular come back but during the current global financial turbulence it has also become one the emerging markets to most suffer those consequences, while growing inflation and pressure on the local currency are scaring investors. The Argentine Central Bank has been forced to inject emergency liquidity to money markets where inter bank rates have soared. It has also acted in support of the peso when it was pushed to its lowest against the US dollar in four and a half years. "The Argentine Central Bank has acted aggressively through the futures market to stabilize the exchange rate", revealed Redrado.