President Javier Milei’s administration said the official U.S. dollar to peso rate will be AR$1,061 at the end of 2024 in a preliminary budget report filed in the Chamber of Deputies on Wednesday.

The document, a preview of the 2025 budget the Economy Ministry must file in September, also forecasts a 139.7% inflation rate for 2024. Cumulative inflation in the first five months of the year reached 71.9%. However, the report added that data published after the preview was finished hinted that prices would rise less than 130% over the year. The number would be around 80 points lower than 2023’s 211%.

Moreover, the government predicted that the country’s GDP would fall by 3.5% in 2024, a more abrupt slump than the 2.8% the International Monetary Fund (IMF) predicted in its latest World Economic Outlook. A June report by the National Institute for Statistics and Census showed that Argentina’s GDP shrank by 5.1% in the first quarter compared to the same period last year.

With the projected exchange rate, the government expects to maintain the 2% monthly crawling peg it adopted after December’s 54% devaluation. Milei and Economy Minister Luis Caputo have denied that they would further devalue the currency while parallel exchange rates escalate, pushing their gap with the official rate. 

If the government complies with its budget forecast, the exchange rate will have risen by 58.3% in 2024.

However, since part of the agricultural sector refuses to sell their U.S. dollars to the Central Bank, the government is having difficulties accumulating international reserves and defending the exchange rate. According to a report by the Argentine Oil Industry Chamber, exporters liquidated the same amount of dollars in the first six months of 2024 compared to the same period in 2023, when the country was stricken by a historic drought. Other strategies for reserve accumulation, such as a new loan from the IMF or kickstarting an international investment boom, have also been unsuccessful so far.

As the parallel dollars and the EMBI index have risen and the shares and bonds have plummeted over recent weeks, even after the Ley Bases approval, Caputo’s position in the government is increasingly precarious. Fausto Spotorno, a member of Milei’s group of economic advisors, said in an interview that Caputo’s program is “clearly transitional” before a “more Mileísta” plan with presidential advisor Federico Sturzenegger heading the Economy Ministry.

The budget preview also forecasted that exports would increase by 14.4% and imports would fall by 20.7%, putting a trade surplus of US$21.9 billion, a value they dubbed a “significant improvement” over 2023’s US$9.2 billion deficit.

The document also celebrated that “in the first five months of the year, the primary surplus amounted to 1% of GDP and the financial surplus to 0.4% of GDP” after inheriting a deficit amounting to 4.4% of the GDP. 

“This result was achieved through a combination of permanent spending cuts and temporary tax increases,” they added, repeating the unsubstantiated notion that Argentina had a 17,000% annual inflation rate and that, at the beginning of December 2023 “the Argentine economy was facing the deepest crisis in its history.”

In September, the administration has to file the complete version of the budget, expected to contain the GDP values, the exchange rate, and the inflation rate it expects for 2025.