MercoPress. South Atlantic News Agency

Growing controversy with IMF over Argentina's inflation

An other jab from outgoing IMF Chief Rato

Inflationary pressures are building in Argentina and there is room for further interest rate increases, a senior IMF official said Wednesday. The warning follows statements earlier in the week by outgoing IMF Managing Director Rodrigo Rato.

"Interest rates remain negative in real terms. We think there is room for further monetary tightening," Charles Collyns, deputy director of the IMF research department told a news conference in Washington. Collyns said it is difficult to make projections on inflation in Argentina since it is not "completely a free market." "We certainly see a build-up in inflationary pressures in Argentina" adding it is difficult to predict how inflation would evolve, but the IMF sees strong upward pressure from wages, which rose 23% in the last year, while the government keeps a number of prices controlled. Argentina has been facing criticism after adopting unorthodox methods to control prices, including accusations from financial experts and economists that the government has been manipulating inflation data. The Argentine economy has grown by more than eight percent each year over the last five years, helped by a boom in consumer spending and agricultural exports following the country's 2001-02 economic crisis. The IMF predicts growth of about 7.5% this year, against 8.5% in 2006, and slowdown to 5.5% in 2008. Average inflation will slow to 9.5% this year from 10.9% in 2006, and should increase to 12.6% in 2008, according to the IMF. The Argentine government official data for inflation was 9.8% in 2006. For 2007, on a December to December basis, IMF predicts inflation of 10% for Argentina, and 13% for 2008. Earlier in the week Rato said that inflation was "becoming a danger" for Argentina and called for a quick normalization and transparency of the economy. Argentine Economy Minister Miguel Peirano was quoted arguing that Mr. Rato's statements "reflect the standing intention of the Fund to audit and intervene in Argentina's economic policy decisions". "It's quite clear that the administration of President Nestor Kirchner has achieved the necessary autonomy in the decision process to preserve the interests of the community", remarked Minister Peirano.