Argentina on Tuesday announced a significant devaluation of its currency as part of a series of drastic economic measures to address the country's ongoing economic challenges.

The peso will be weakened by over 50% to 800 per dollar, new Economy Minister Luis Caputo said.

"For a few months, we're going to be worse than before," Caputo said in a televised message, two days after libertarian Javier Milei took charge as the president of South America's second largest economy.

Argentina's annual inflation rate is at 143%, the currency has plummeted, and 40% of Argentines are living in poverty.

At his swearing-in ceremony, Milei promised a new era for the country but warned of painful austerity measures.

"The bottom line is that there is no alternative to austerity, and there is no alternative to shock treatment," Milei warned over the weekend. 

On Tuesday the economy minister also said that there would be cuts in the state's generous subsidies of fuel and transport.

Caputo said politicians had long supported the subsidies to "deceive people into believing that they are putting money in their pockets. But as all Argentines will have already realized, these subsidies are not free but are paid with inflation."

He said Argentina needed to handle a deep fiscal deficit, which he put at 5.5% of GDP, adding that the country had a fiscal deficit for 113 of the last 123 years, the cause of its economic crisis.

"We're here to solve this problem at the root," he said. "For this we need to solve our addiction to a fiscal deficit."

Curbs on state spending 

Aside from the spending cuts, Caputo also said that all state advertising would be suspended for a year, adding that it had cost 34 billion pesos ($92 million, €86 millon) in 2023.

In addition "The state will not tender any more new public works, and will cancel approved tenders whose development has not yet begun."

"The reality is that there is no money to pay for more public works that, as all Argentines know, often end up in the pockets of politicians or businessmen on duty," he said.

Another step would be canceling the renewal of public jobs contracts that were less than a year old.

President Milei has already cut nine government ministries, which Caputo said would slash 34% of all political jobs.

Meanwhile, the International Monetary Fund (IMF) deemed the measures "bold" and said in a statement it would "help stabilize the economy and set the basis for more sustainable and private-sector led growth" following "serious policy setbacks" in the past months.

"I welcome the decisive measures," IMF chief Kristalina Georgieva said, calling it "an important step toward restoring stability and rebuilding the country's economic potential."

dvv/lo (AFP, AP, Reuters)