The administration of Argentina’s newly elected president, Javier Milei, has announced that it is devaluing its currency by more than 50% against the US dollar as part of a drastic effort to combat the nation’s economic woes.
Economy Minister Luis Caputo said in a televised message late Tuesday that the exchange rate is to be cut to 800 pesos to the US dollar, from around 391 pesos, while there will also be cuts to energy and transportation subsidies.
"We are going to be worse off than before for a few months, particularly in terms of inflation," Caputo said. "And I say that because, as the president says, it is better to tell an uncomfortable truth than a comfortable lie."
Libertarian Milei was sworn in as president of the second-largest economy in South America on Sunday and immediately warned of tough measures. It followed on from a campaign pledge of "economic shock therapy" to Argentina and a pledge to significantly slash the size of the state by reducing the number of ministries from 18 to 9.
Argentina is suffering 143% annual inflation, causing the country’s currency to plummet with poverty levels soaring to 40%.
The country also has a trade deficit of $43 billion as well as $45 billion in debt to the International Monetary Fund, with $10.6 billion due to private and multilateral creditors by April. The economy is in a deep recession.
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Milei rose to power from relative obscurity and carried a chainsaw during the campaign trail to symbolize how he was going to cut the size of the government.
As part of the new measures, Caputo said the government is canceling tenders for any public works projects and cutting some state jobs to reduce the size of the government.
"If we continue as we are, we are inevitably heading toward hyperinflation," Caputo said. "Our mission is to avoid a catastrophe."
During Milei’s inaugural address on Sunday, the new president spoke about the nation’s economic emergency and sought to prepare the public for a major adjustment to public spending cuts.
"We don’t have alternatives and we don’t have time. We don’t have a margin for sterile discussions. Our country demands action, and immediate action. The political class left the country at the brink of its biggest crisis in history," he said, according to the Associated Press.
"We don’t desire the hard decisions that will be made in coming weeks, but lamentably they didn’t leave us any option."
Fox News’ Greg Wehner and the Associated Press contributed to this report.
