As part of a package of large-scale spending cuts, Argentina has devalued its currency by more than 50% . This is intended to address the country’s worst economic crisis in decades. The plans, introduced under the newly inaugurated administration of Javier Milei, include cutting energy subsidies and cancelling tenders for public works.
Economy minister Luis Caputo has moved to weaken the official exchange rate to 800 pesos a dollar. He said the central bank would target a monthly devaluation of 2%. Caputo said the moves, which were welcomed by the International Monetary Fund (IMF), would be painful in the short-term but were needed to cut the country’s fiscal deficit and bring down soaring triple digit inflation.
Caputo said the country needed to tackle a deep fiscal deficit he put at 5.5% of gross domestic product, arguing that Argentina had an “addiction” to fiscal deficits, 113 over the last 123 years.
Milei campaigned on a pledge to get rid of the peso and replace it with the dollar in order to get the economy back on track. The peso has been artificially supported for years by strict capital controls, and its value has plunged roughly 52% this year against the US dollar. In recent years, Argentina’s Central Bank has printed more of the peso to help the country’s government avoid defaulting on its debt. That has resulted in skyrocketing prices.
Source: theguardian.com