BUENOS AIRES, Argentina – BELIEVE it, or not? That’s the question of the day in Argentina, where economic stability and social peace may depend on the credibility of a new inflation index being unveiled Thursday.

For seven years, the government has systematically underestimated inflation and thus overestimated economic growth, critics say. Even close government allies don’t believe the old data anymore, demanding 2014 pay raises of more than 30 per cent to keep up with inflation officially estimated at just 10 per cent a year.

The new index was designed in consultation with the International Monetary Fund, which shamed Argentina last year by refusing to include government economic data in its reports. Argentines also have lost faith in the numbers, feeding inflation and capital flight by trading their pesos for dollars as fast as they can.

If the new index’s first monthly inflation report Thursday afternoon recognises true living costs, President Cristina Fernandez could use it to begin resolving the spiraling inflation that is causing so much social unrest, said Matias Carugati, chief economist at the Management & Fit consultancy in Buenos Aires.

“This is the government’s silver bullet to begin to take a more rational path and combat this evil,” Carugati told The Associated Press.

If the new report acknowledges January 2014 inflation of at least three per cent, “it would be credible and a good start. But if we keep having statistics of about one per cent, we’re going to see that they keep lying,” Carugati said.

The old index almost always reported monthly inflation at less than one per cent, even as Argentine shoppers watched their grocery prices double and triple since 2007, when political appointees changed the methodology of the National Institute of Statistics and Census.

The latest estimate from private economists, published Wednesday by minority lawmakers in Congress, is that January’s inflation topped 4.6 per cent. That’s 55 per cent on an annual basis, the highest in many years for Argentina, and one of the highest inflation rates in the world.

Argentina has seen dangerous protests in recent months as its unions prepare for annual negotiations over pay hikes. Uprisings by provincial police officers provoked deadly looting in December before governors, complaining of guns at their heads, agreed to budget-busting increases. Street demonstrations over inflation routinely complicate life in the capital.

With the Labour Ministry poised to oversee salary talks for nearly 1,000 sectors of the economy, having reliable data “would really organise the discussion and tamp down inflationary expectations,” said economist Dante Sica, who directs the abeceb.com consultancy in Buenos Aires.

The new index will track prices on a basket of 520 goods and services, including food, drinks, clothing, housing, appliances, health care, transportation, communication, recreation and education. Unlike the old one, which measured prices in metropolitan Buenos Aires, the new index aims to cover 200,000 prices across the nation.