Argentina’s recent leader starts ‘shock therapy’ by undervaluing peso
Date
12/14/2023 7:20:37 AM
(MENAFN) Argentina's recently elected President, Javier Milei, has launched a comprehensive economic reform agenda, unveiling a series of measures aimed at addressing the country's deepening economic crisis. In a televised announcement, Economy Minister Luis Caputo detailed the plan, which includes a substantial devaluation of the peso, cuts to energy and transportation subsidies, and a freeze in spending on select major state programs. The initiative, described as "economic shock therapy," underscores the administration's commitment to stabilizing the economy, curbing inflation, and navigating the worst economic crisis in decades.
The cornerstone of the economic overhaul is a significant devaluation of the peso, changing the official dollar exchange rate from 365 pesos to 800 pesos per dollar. This move marks a departure from the strict capital controls that have supported the peso in recent years, creating a considerable gap between the official exchange rate and parallel rates.
Minister Caputo acknowledged the short-term pain associated with the measures but emphasized their necessity for addressing the fiscal deficit and combating the triple-digit inflation plaguing Argentina. With inflation soaring at 150 percent, low cash reserves, and a substantial government debt of USD44 billion to the International Monetary Fund (IMF), the nation faces an uphill battle to stabilize its economic trajectory.
Caputo stated, "The objective is simply to avoid catastrophe and get the economy back on track," highlighting the urgency of the reforms. Approximately 40 of Argentina's population currently lives in poverty, underscoring the pressing need for effective economic measures.
The International Monetary Fund (IMF) responded to the announced measures, describing them as "bold" and asserting that their implementation would contribute to stabilizing the economy. The IMF's statement emphasized the importance of setting the groundwork for sustainable and private-sector-led growth, following what it termed as "serious policy setbacks" in recent months.
As Argentina embarks on this ambitious economic overhaul, the global community closely watches the outcomes and implications of the measures, recognizing the challenges and opportunities inherent in the nation's pursuit of economic stability and recovery.
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