Argentina is about to cut on the trail of expenditure to get over the acute financial crisis of the country.
Mauricio Macri, the President of the country has committed to drag the country out of the mess and take firm control of the bloating debt.
Though the Central Bank has put the endeavor to pull up the depreciating value of Peso by hiking the key interest rate to 60%, Peso has lost a huge portion of its value, contributing to the grave scenario of the country.
In fact, due to the depreciating condition of the country, the government has planned to eradicate 10 ministers from the ministry.
Previously, Argentina had severed ties with IMF or International Monetary Fund, as they believed that the stringent rules of the firm had led to the severe financial condition of the country in 2001.
Since the country is in a tight corner, it has decided to extend its desperate hands to the IMF in the hope to receive financial help.
Nicolas Dujovne will be leaving for Washington on Tuesday to finalize the legal terms on the same with Christine Lagarde, the chief of IMF.
The US has threatened to pull the funds from the country as the dollar has grown significantly stronger against the Peso while the energy prices have gone unnaturally high.
As a result, Argentina was compelled to seek financial assistance from the IMF worth $50 billion.
It stated that the move was crucial for the country as the international investors will get an assurance to continue relying on the country.
On the other hand, IMF has suggested the country take a proper initiative that will not only save the country from diving deeper into debt but will also tackle the financial deficit in an irreversible manner.
The only way to do it is to cut the spending of the government, which Argentina will initiate soon.
Argentina is attempting to mollify investors by cutting spending in an effort to reduce its budget deficit. The government has announced plans to reduce public sector wages, freeze hiring, and cut subsidies.
These measures at reducing the government’s borrowing needs and restoring confidence in the economy.
The government’s efforts to appease investors have been met with mixed reactions.
Some investors have welcomed the measures, while others have expressed concerns that they will hurt economic growth.
It remains to be seen whether the government’s plans will be enough to convince investors to return to Argentina.
Here are some of the specific cuts that the government has announced:
- A 10% reduction in public sector wages.
- A freeze on hiring in the public sector.
- A cut of 50% in subsidies to state-owned enterprises.
- A reduction in the deficit by 2% of GDP.
The government has also said that it is open to discussing debt restructuring with its creditors. This would involve renegotiating the terms of Argentina’s $100 billion debt, which is currently in default.
The government’s efforts to mollify investors come at a time when Argentina is facing a number of economic challenges. The country is in the midst of a recession, and inflation is running at over 50%. The government’s debt is also unsustainable, and it is facing a growing risk of default.
The government’s plans to cut spending are likely to have a negative impact on economic growth. However, the government believes that these measures are necessary to restore confidence in the economy and attract foreign investment.
Uncertainty surrounds the viability of the government’s efforts. However, the stakes are high, as Argentina’s economic future depends on it.