Back to the nineties

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There are definite similarities between the situation facing Argentina today and in the 1990s:Both followed uncomfortably high inflation (though the late-1980s hyperinflation was worse than the more recent manifestation);They both follow protracted—and require ongoing—IMF engagement though back-to-back SBA or EFF programs (though IMF exposure today at 8% of GDP is higher than the 2-3% in the 1980s and 1990s.)Both attempt stabilisation on a foundation of a very low stock of gross and net international reserves (then under a currency board, today a dirty float);Finally, both periods require tight fiscal policy (though the 1990s turned out to be hiding looser-than-ideal fiscal.)Most important, perhaps, the growth cycle in the 1990s was different: due to bank credit creation and private sector spending, something happening once more today under President Milei. Yet the 1990s did not end well for Argentina. It might be useful to draw lessons from that decade.Private saving-investmentIndeed, the latest IMF program document (the EFF First Review) implies that Argentina’s private sector saving-investment balance—the sum of the external current account and fiscal deficit, thus the accumulation of net financial claims by the private sector on either the domestic government or rest of the world—will print negative for the first time for 20 years in 2025 and to remain in deficit over the forecast horizon. And Argentina is expected to register a private SI-balance alongside current account deficit for the first time since 1999—at the end of a period when private deficits drove a fluctua…