By Swann Collins, investor, writer and consultant in international affairs – Eurasia Business News. December 12, 2024. Article no 1334.
Argentina has achieved a historic milestone by eliminating its fiscal deficit for the first time in 123 years, a significant announcement made by President Javier Milei. This achievement is attributed to several aggressive economic reforms and austerity measures implemented since he took office one year ago.
Drastic Spending Cuts: President Milei’s administration undertook substantial reductions in government spending, which included slashing financial transfers to provinces and eliminating subsidies for energy, transport, and other sectors. These cuts were part of a broader strategy to stabilize the economy and restore fiscal balance.
Ending Monetary Emission: The government has completely halted monetary emission, a practice that had previously contributed to high inflation rates. Milei emphasized that eliminating the deficit would help address issues related to debt and inflation, which had plagued Argentina for years.
Now, thanks to the disruptive policy of Javier Milei, Argentina’s monthly inflation rate slowed to 2.4% in November, the lowest in over four years, the official INDEC statistics agency said on Wednesday. Inflation already slowed to 2.7% in October, the lowest level in three years in a win for the libertarian government of President Javier Milei who came to power almost a year ago promising to pull Argentina out of a dire economic crisis. When he took office in December 2023, monthly inflation surged to 25%.
Reduction of Government Agencies: As part of the austerity measures, several government agencies were dissolved, including the Ministries of Culture, Health, Labor, and Social Development. This move aimed to streamline government operations and reduce public sector useless employment by thousands.
Fiscal Surplus Achievement: The combination of spending cuts and reduced monetary emission led to a fiscal surplus of approximately 0.4% of GDP, marking a significant turnaround from previous years when Argentina faced chronic deficits.
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Political Challenges: Despite these achievements, Milei faces political opposition in Congress, where he controls less than 15% of the seats. His administration is navigating negotiations with lawmakers who seek to increase spending on social programs amid temporary rising poverty levels. Those lawmakers are among those who benefited directly from large state spendings.
Economic Context: While the elimination of the deficit is a notable success, it comes against a backdrop of severe economic hardship for many Argentines, with poverty rates climbing significantly under Milei’s austerity measures.
Milei’s approach has garnered attention both domestically and internationally, with figures like Elon Musk praising his efforts. However, the long-term sustainability of these measures remains uncertain as Argentina continues to grapple with high inflation and social challenges.
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© Copyright 2024 – Eurasia Business News. Article no. 1334.