Argentina which announced soy dollar scheme to stimulate agri-exports and increase the government’s dollar reserves, will depreciate the peso against the US dollar by more than 50%, to 800 pesos for 1 dollar, as well as cut energy subsidies and cancel public works tenders, which is an economic shock therapy aimed at resolving the country’s biggest crisis in the last decade. This was stated by the new Minister of Economy of Argentina Luis Caputo, Reuters reports.
“The goal is to simply avoid a catastrophe and get the economy back on track,” he said.
According to the minister, the country needs to cope with a deep budget deficit, which, according to his estimates, is about 5.5% of GDP.
150% inflation
As a reminder, Argentina is struggling with inflation, which is approaching 150% for the year and has negative central bank reserves.
The IMF called the proposed measures “bold enough” and expressed hope that they “will help stabilize Argentina’s economy and create the basis for more sustainable growth.”
Grain markets were blocked
It is also noted that the country’s foreign exchange and grain markets were blocked on December 12, as traders were waiting for an economic plan from the new government. Banks had already anticipated a sharp devaluation, and some had already lowered the exchange rate to 700 pesos per dollar, while the official rate was 366 pesos per dollar.
Source: Apkinform