Argentina's president-elect Javier Milei
Argentina's president-elect Javier Milei. AFP

The Argentina government announced Tuesday the devaluation of the local currency, the peso, and cuts to energy and transportation subsidies, as part of measures to revive a crumbling economy.

In a televised message, Economy Minister Luis Caputo said the peso's official exchange rate was now 800 to the dollar. Earlier, it was 400 pesos per dollar.

"If we carry on as we are, we will have hyperinflation," he said, adding that prices were going to hike more than 200% this year, as per Financial Times. "Out of the last 123 years, Argentina ran a fiscal deficit in 113 we have come to solve the addiction to fiscal deficits."

Caputo said the country was going to see "worse than before" for a couple of months, adding that all the new government projects were halted as there was "no more money."

He also announced a temporary increase in taxes on imports, and vowed to remove the current government permits system for importing goods. Furthermore, he promised that export taxes would be removed after the economy was in a better condition.

Argentina, which is tackling triple-digit inflation, owes the International Monetary Fund (IMF) $45 billion, and also has a trade deficit of $43 billion.

Reacting to Milei administration's tough decisions, IMF director of communications, Julie Kozack, said the "IMF staff welcome the measures announced earlier today by Argentina's new Economy Minister, Luis Caputo."

Kozack noted 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," adding that Argentina's new administration's "decisive implementation will help stabilize the economy and set the basis for more sustainable and private-sector led growth."

Going forward, IMF staff and the new Argentine authorities will be working together "expeditiously" to better the economic condition of the country.

"Following serious policy setbacks over the past few months, this new package provides a good foundation for further discussions to bring the existing Fund-supported program back on track," he concluded.

The announcement of devaluation was made just two days after President Javier Milei took over the office. Argentina's inflation is currently hitting a 143% rate annually.

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