Milei announces after taking office a harsh fiscal adjustment and stagflation

Milei announces after taking office a harsh fiscal adjustment and stagflation


The new president of Argentina, Javier Milei, anticipated this Sunday, in his first speech as head of state, that he will apply a harsh fiscal adjustment and that there will be “stagflation” for several months, but he promised that it will be the “last bad drink” before the “reconstruction” of the country.

“Unfortunately, I have to say it again: there is no money. The conclusion is that there is no alternative to adjustment and there is no alternative to shock,” Milei said when speaking to a crowd at the doors of the Argentine Congress palace.

The president admitted that the “shock” plan that he will apply will have a negative impact on the level of activity, employment, real wages and the poverty and indigence rate.

“There will be stagflation, it is true, but it is not something very different from what has happened in the last two years,” he said.

Milei assured that the “inheritance” left by Kirchnerism is the worst that an Argentine Government has ever received, with a financial and fiscal deficit equivalent to 17% of the GDP, an inflation that grows at an annual rate of 300%, an economic activity paralyzed, a poverty rate of 45% and a destitution rate close to 10%.

He ratified that he will apply a fiscal adjustment of 5% of GDP which, as he promised, will fall “almost entirely” on the State and not on the private sector.

He also confirmed that he will “clean up” the Central Bank’s liabilities and put an end to the issuance of currency, which, he insisted, is the cause of Argentina’s high inflation.

But he stated that monetary policy acts with a delay of between 18 and 24 months, so he anticipated that inflation will remain high and cited private forecasts that foresee monthly rates of between 20% and 40% between this month and next February.

“This is the legacy they leave us: a planted inflation of 15,000% annually, which we are going to fight tooth and nail to eradicate,” he promised.

Milei drew a delicate fiscal and monetary scenario that, in his assessment, places Argentina on the verge of hyperinflation, which could reach 15,000% annually. “This is the legacy they leave us: a planted inflation of 15,000% annually, which we are going to fight tooth and nail to eradicate,” she promised.

“It is our highest priority to make all possible efforts to avoid such a catastrophe, which would take poverty above 90% and indigence above 50%,” he insisted.

“The bomb in terms of debt amounts to 100 billion dollars”

Milei also warned of the “inheritance” in terms of debt: 30 billion dollars of debt with importers; 10,000 million of profits retained from foreign companies as profit transfers; 25,000 million of Central Bank debt; and 35,000 million of Treasury debt.

“The bomb in terms of debt amounts to 100,000 million dollars, which will have to be added to the nearly 420,000 million of already existing debt,” he warned.

Added to these are the maturities in 2024 of sovereign debt issued in pesos, for the equivalent of about 90,000 million dollars, plus the maturities with multilateral organizations for 25,000 million.

“With financial markets closed and the agreement with the International Monetary Fund (IMF) fallen due to the brutal defaults of the outgoing government, the ‘roll over’ of debt is extremely challenging,” he warned.

Despite the tremendous panorama described, Milei said that, after the “macroeconomic readjustment”, Argentina’s situation will begin to get “better.” “There will be light at the end of the road,” she promised.





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