Argentinian President Javier Milei's government announced a 50% currency devaluation as part of the new government's drastic economic measures in reining in the nation's crisis.
The Tuesday announcement also includes cuts to energy and transportation subsidies that Milei argued are needed to deal with an economic "emergency." In a televised message, Economy Minister Luis Caputo said that the Argentine Peso will be devalued by 50% from 400 pesos to the U.S. dollar to 800 pesos to the dollar.
Argentina Devalues Currency
The official said that for the next few months, the country will be financially worse than it was before. The announcement comes two days after far-right libertarian Milei was sworn in as Argentina's new president. The country is the second-largest economy in South America.
Milei said that the nation does not have any time to consider other alternatives to fix its economic crisis. Currently, the country is suffering 143% annual inflation and its currency has plunged while four in 10 residents are impoverished, as per CBS News.
Furthermore, Argentina also has a yawning fiscal deficit, a trade deficit of $43 billion, and a $45 billion debt to the International Monetary Fund (IMF). roughly $10.6 billion of this debt is due to the multilateral and private creditors by April.
Caputo said that the Argentinian government is canceling tenders of any public works projects and cutting some state jobs to reduce the size of the government. The official noted that the new measures are needed to cut the fiscal deficit that he argued is the primary cause of the country's economic crisis, including surging inflation.
The economy minister warned that if Argentina continues as it is, it would inevitably head towards hyperinflation. The IMF welcomed the country's new measures and said that they provide a "good foundation" for further discussions with Argentina regarding its debt with the institution.
Economic Crisis
Milei's campaign during the presidential race focused on his pledge to get rid of the peso and replace it with the dollar. This was part of an attempt to get the economy back on track as the peso has been artificially supported by strict capital controls for several years, according to CNN.
In the last few years, Argentina's central bank has printed more of the peso to help the government avoid defaulting on its debt. However, this effort has resulted in skyrocketing prices across the region.
During his announcement, Caputo also reiterated Milei's campaign theme that "there is no money." He noted that this was especially true for public works as there is no fund to pay for works that often end up in the pockets of politicians and business people.
Milei's government is also cutting the number of ministries and secretariats by 50% and 49%, respectively. This was announced by presidential spokesman Manuel Adorni on Tuesday. He added that the situation is critical and cited a report by the Argentine Catholic University.
A day before the announcement, Adorni said that the new administration would be revising all state employees contracts to "detect irregularities." He has now noted that this process has already begun, said the Buenos Aires Herald.
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