Russian President Vladimir Putin has criticized his Argentine counterpart’s plan to ditch the national currency, the peso, for the US dollar.

According to The Iran Project,Speaking during a live press conference on Thursday, Putin said that the pledge of newly elected Argentine President Javier Milei to adopt the greenback would result in a “significant loss of the country’s sovereignty.”

Dollarization is one of Milei’s core proposals, aimed at taming triple-digit inflation and supporting Argentina's beleaguered economy amid low cash reserves and high government debt. Adopting the US dollar would take control of monetary policy away from Argentina’s central bank and hand it over to the US Federal Reserve.

The announced policy goes contrary to the de-dollarization trend pioneered by Russia and supported by many other developing economies, which has been gaining momentum since the imposition of Ukraine-related sanctions on Moscow. In response to the restrictions that effectively cut the country off from Western financial markets, Russia and its leading trade partners within the BRICS group of developing economies have started to switch to national currencies in trade. Argentina was set to join the bloc, made up of Brazil, Russia, India, China and South Africa, on January 1, 2024, but the new government scrapped the decision.

According to Putin, Milei’s plan to scrap the peso or peg the national currency to the dollar could also result in social instability as it would trigger a sharp reduction in 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,” the Russian president maintained.

Argentina’s new government announced earlier this week the start of its "economic shock therapy" policy, namely a sharp devaluation of the peso, cuts to energy and transportation subsidies and a freeze in spending on some major state programs.

The South American nation is trying to battle inflation that hovers around 150% year-on-year. The country owes $44 billion to the International Monetary Fund, and 40% of Argentinians reportedly live below the poverty line.