Argentina introduced its largest-denomination banknote on Monday as inflation running at more than 100 percent a year forces the population to carry ever growing stacks of cash to pay for everyday purchases.
Yet the new 2,000-peso note put into circulation by the nation’s Central Bank is valued at only about US$4, according to commonly used parallel exchange rates. At the official rate, which is overvalued by currency controls and restrictions imposed by the government, it’s worth about US$8.50.
While the new denomination is an improvement over the 1,000 peso note, until then the most valuable available, it still disappointed private economists and citizens who have been clamouring for banknotes of up to 10,000 pesos. The fast depreciating currency has caused logistical nightmares for customers, businesses and banks, which have had to open new vault space to accommodate more notes for ATMs.
Consumer prices rose 109 percent in April, the fastest since 1991 when Argentina was emerging from hyperinflation. Galloping price increases, along with a record drought, are expected to push the economy into recession before a presidential election later this year.
Economists surveyed by the Central Bank see annual inflation near 150 percent over the next 12 months.
by Patrick Gillespie, Bloomberg