Argentina’s Economic Crisis: Government’s Tough Decisions and IMF Support

2023-12-13 10:55:13

Argentina! The lords of the football world. Home of football legend Lionel Messi. The birthplace of Cuban revolutionary Che Guevara. Argentina, the third largest economic power in Latin America, has many such mountains.

But Argentina is going through a severe economic crisis. Essentials are expensive. Inflation is 140 percent (remember it is 5.55 percent in India). 40 percent of the population in poverty.

But, as in a heated football match, Argentina are poised to quickly run into the turf of excellence. For this purpose, the new government led by President Yavier Millei is taking tough decisions.

The peso was devalued

The effort to improve the country’s economic situation is an attempt to improve the economic situation of the country, which is different from the policies of the previous governments.

As part of this, the value of the Argentine currency, the peso, was cut by more than 50 percent. The value of 365 against the dollar was cut to 800. That is, if you pay one dollar, you will get 800 pesos. In terms of Indian rupees, if you paid 1 rupee earlier, you would get 40 pesos, now you will get more than 80 pesos.

Meanwhile, Argentines have lost interest in the peso since the devaluation. People are scrambling for dollars. According to reports, one has to pay 1,000-1,050 pesos for one dollar in Argentina’s black markets.

Why is the value reduced?

Yavier Millei says that due to the mismanagement of the previous governments, the coffers of the country are empty and there is no money to take. Argentine governments have traditionally been in the habit of spending more than they earn. Argentina has recorded a fiscal deficit for 113 of the last 123 years.

Uncontrolled subsidies plunged the country into crisis. Inflation increased exponentially. He also points out that the country is heading towards hyperinflation.

The peso depreciated to cope with expectations that inflation could now spiral further out of control. Moreover, the government has locked down restrictions on transport and energy subsidy schemes.

Financial assistance to provinces will be cut. The central government will not implement any new schemes for the time being. The number of ministries has been reduced from 18 to 9. The number of secretaries in the ministry has been reduced from 106 to 54.

At the same time, it has been announced that the expenditure on the welfare of the poor will be doubled. Caputo imposed heavy taxes on imports. Exports also have heavy taxes. Caputo’s position is that taxes can be changed only when the economic situation improves.

Welcome to the IMF

The International Monetary Fund (IMF) has welcomed the Argentine government’s new economic policies, including devaluation of the currency. The IMF had given a loan of 4,300 crore dollars (3.6 lakh crore rupees) to Argentina.

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