Argentina is set to devalue the peso by more than 50% as part of emergency measures to help the nation's struggling economy, the country's Economy Minister Luis Caputo announced on Tuesday.
The move changes the dollar conversion rate to 800 pesos per dollar from 365 pesos and comes just days into President Javier Milei's term.
Milei's electoral campaign centered on a commitment to replace the peso with the dollar, aiming to steer the economy toward recovery. Over the years, the peso has been artificially supported by strict capital controls, leading to a drastic 52% decline in its value against the US dollar this year, according to sources.
Argentina's central bank has resorted to increasing the circulation of the peso to prevent the government from defaulting on its debts. However, this strategy has resulted in a sharp rise in prices, contributing to hyperinflation.
This move signifies the initial step in curbing hyperinflation, which prompted Argentina's central bank to raise its benchmark interest rate to 133 percent back in October.
Caputo, echoing Milei's campaign stance, emphasised the scarcity of funds while outlining additional measures. These include a reduction in new public infrastructure projects, non-renewal of labor contracts exceeding one year, and cuts in energy and transportation subsidies.
Caputo highlighted the financial constraints, stating, “There's insufficient funding to support projects that often end up benefiting politicians and business figures.”
In response to Caputo's announcements, the International Monetary Fund (IMF) voiced support for these new initiatives. Julie Kozack, the IMF's director of communications, expressed approval, stating, “IMF staff welcome the recent measures announced by Argentina's new Economy Minister, Luis Caputo. These decisive initial steps aim to substantially enhance public finances while safeguarding the most vulnerable segments of society and reinforcing the foreign exchange system.”
(Inputs from ANI)
