Former IMF board member backs Javier Milei’s dollarisation of Argentina

A former US representative at the International Monetary Fund’s executive board supports Argentina dropping the peso in favour of the dollar to help thwart one of the world’s fastest inflation rates, a rare show of support for a proposal largely slammed by establishment figures.

“Dollarisation would be very positive for Argentina,” Mark Rosen, the US official on the IMF board from 2019 to 2021, said in an interview, stressing that financing the plan would be a key issue. “It would basically eliminate most of the risk of future inflation, which is a huge issue. It wouldn’t necessarily deal with the spending issue, but it would anchor monetary policy, and be a big positive change.”

Frontrunner Javier Milei has promised to dollarise Argentina’s economy if he wins the country’s presidential election later this year. The proposal, lacking key specifics such as the source of dollars needed to undertake it, the exchange rate for the switch or a transition timeline, has been lambasted by economists at home and abroad.

Argentina’s US$44-billion IMF deal, the largest for the Washington-based lender, hinges on the next government’s economic policy. Current President Alberto Fernández’s administration has repeatedly missed targets after budget overspending and asked to rework the programme. That puts pressure on the next government to come up with a credible plan that wins IMF support. 

An IMF spokesperson didn’t immediately comment on Rosen’s remarks as he is no longer at the institution. The lender hasn’t officially expressed a view on Milei’s dollarisation proposal. Alejandro Werner, a former IMF official who worked on the country’s programme, criticised Milei’s dollarisation proposal, labelling it “impossible.”

Rosen, who was nominated by former US president Donald Trump’s administration and served in an acting capacity, arrived at the IMF in 2019 just as the organisation lent the previous government a record US$57 billion — of which US$44 billion was ultimately spent. That programme failed to avoid an economic crisis, resulted in then-president Mauricio Macri losing the 2019 election and was scrapped in favour of the current deal, which is again way off track.

Rosen is now a partner at investment firm Advection Growth Capital in New York and worked for four decades as an investment banker, including a focus on Latin America. He argues that dollarisation would help Argentina, infamous for zigzagging policies and inflation currently above 124 percent, because it would likely be a permanent change that a future government couldn’t reverse. But he said the big question is how Milei plans to finance his dollarisation strategy.

“Dollarisation — if they can fund it — makes sense,” Rosen said. “The issue is can they fund it? And will the international community fund it?”