The brand new president of Argentina, Javier Mileianticipated this Sunday, December 10, 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 It 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: there is a financial and fiscal deficit equivalent to 17% of GDP, inflation that grows at an annual rate of 300%, economic activity paralyzed, a poverty rate of 45% and a destitution rate close to 10%.
He confirmed 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.
No more money will be issued
He also confirmed that he will “clean up” the Central Bank’s liabilities and put an end to the issuance of currencywhich, he insisted, is in his opinion the cause of Argentina’s high inflation.
However, he stated that monetary policy acts with a delay of between 18 and 24 months, therefore, he anticipated that inflation will remain high and cited private forecasts that foresee monthly rates of between 20% and 40% between this month and February. next.
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.
“It is our highest priority to make every possible effort to avoid such a catastrophe, that would bring poverty above 90% and indigence above 50%”he insisted.
The challenge of facing debt
Milei also warned of the “inheritance” in terms of debt: US$30 billion in debt with importers; US$10 billion of profits retained from foreign companies as profit transfers; US$25 billion of Central Bank debt; and US$35 billion of treasury debt.
“The bomb in terms of debt amounts to US$100 billion, which will have to be added to the nearly US$420,000 million of already existing debt”he warned.
Added to this are the maturities in 2024 of sovereign debt issued in pesos, for the equivalent of about US$90,000 million, plus maturities with multilateral organizations for US$25,000 million.
“With closed financial markets 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 this complex panorama, 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.
Source: Larepublica
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