Shortly after Argentinian President Javier Milei assumed office on Dec. 10, 2023, Argentina announced it would devalue its currency because of an economic shock.
The South American country recently announced a grand evaluation of its currency and reductions in energy and transportation subsidies. Milei said such actions were taken to address Argentina’s economic predicament.
During a broadcast speech, Argentina’s Minister of Economy, Luis Caputo, stated that the value of the Argentine peso would decrease by 50% from 400-800 pesos to the U.S. dollar.
“For a few months, we’re going to be worse than before,” the economic minister said two days after Milei’s inauguration.
BREAKING: Argentina's President Javier Milei announces currency devaluation by 54% and spending cuts in an effort to revive the economy.
The new exchange rate has been adjusted to 800 Argentine Pesos per US dollar.
Spending cuts include suspending public works, cutting… pic.twitter.com/jj8cdO2Fs3
— The Kobeissi Letter (@KobeissiLetter) December 12, 2023
Milei said that, given Argentina’s economic state, there were no other alternatives to pursue.
Argentina’s annual inflation rate is at a whopping 143% and the country’s currency has steadily gone downhill, financially affecting 40% of Argentinians. The nation is also suffering from a trade deficit of $43 billion and owes the International Monetary Fund (IMF) $45 billion.
Caputo said the Argentinian government is reducing the size of government by cutting state jobs and eliminating tenders of public work projects, adding that the country would begin cutting energy and transportation subsidies.
Caputo said such measures are essential to soothe Argentina’s economic problem. He noted that the “root of all of the nation’s economic issues” was its fiscal deficit and rising inflation.
“If we continue as we are, we are inevitably heading toward hyperinflation. Our mission is to avoid a catastrophe,” he said.
The IMF praised the measures, claiming they provide “a good foundation” for continued discussion with Argentina about the country’s debt with the institution.
“These bold initial actions aim to significantly improve public finances in a manner that protects the most vulnerable in society and strengthen the foreign exchange regime,” the IMF said in a statement. “Their decisive implementation will help stabilize the economy and set the basis for more sustainable and private-sector led growth.”
While on the campaign trail, Milei vowed to eliminate Argentina’s Central Bank, accusing it of printing money and exacerbating inflation. The then-presidential candidate said he would replace Argentina’s currency with the U.S. dollar.