Russian President Vladimir Putin has recently criticized newly-elected Argentine President Javier Milei's plan to replace the Argentine peso with the U.S. dollar.
During an annual televised Direct Line question-and-answer session with Russian citizens on Thursday, Putin commented on the Argentine authorities' decision to adopt the dollar.
"Everyone knows the idea of the newly elected President of Argentina to switch to the dollar within the country," Putin said during the live press conference, per a translation provided by Russian news agency Tass.
"This is the sovereign decision of each country, but in Argentina, inflation, as far as I know, is at 143 percent."
While he said he could understand the Argentine government's perspective, the Russian president cautioned that the move would lead to a "significant loss of the country's sovereignty."
Putin also warns that Milei's plan to eliminate or tie the peso to the dollar may cause social instability by sharply cutting social spending.
"If there is no national currency, you can't print anything, there is only one way – reducing budget spending for the social sphere, a severe cutting of wages, pensions, expenses on medicine, on roads and domestic security," Putin said.
Ultimately, the Russian president recognized the current leadership's prerogative to address these problems. Even so, he concluded with concern about the implications of such a move on the country's independence.
New government's economic overhaul
Milei, who was only inaugurated as president on December 10, revealed a string of drastic economic measures this week. The measures include a 50 percent currency devaluation, decreased aid to provincial governments, suspension of public works, gas and electricity subsidy cuts and tax hikes.
The new government's "economic shock therapy" policy aims to tackle its 150 percent year-on-year inflation rate. The policy is also set to address a $44 billion debt to the International Monetary Fund (IMF) and a reported 40 percent of the population living below the poverty line.
Milei, who won the election with nearly 56 percent of the vote, is proposing dollarization to control high inflation. This move would shift control from Argentina's central bank to the U.S. Federal Reserve.
Despite sounding severe, analysts argue that such radical steps may be the only viable means to salvage the country's economy.
"It was a good start. If the economy were a house, it is already burning," said Ivan Werning, an economist at the Massachusetts Institute of Technology, as quoted by the Washington Post.
"Getting the fiscal house in order is mandatory, so these are the right step: a mix of taxes and spending adjustments."
However, many economists also raised the crucial question of whether the Argentinian people would continue to support his plan as real economic hardships unfolded.
Furthermore, Milei's new policy directly opposes the de-dollarization trend led by Russia, which is supported by many developing economies.
The trend has led countries like Argentina to switch to national currencies in trade. Yet, Argentina, initially set to join the BRICS group on January 1 of next year, reversed the decision under the new government.