BUENOS AIRES: On the streets of Buenos Aires, Argentines were starting to grapple on Wednesday with how they will be impacted by major austerity measures and an over 50 per cent devaluation of the local peso currency, part of a shock plan to stabilise the economy.

The government of new libertarian President Javier Milei unveiled plans on Tuesday to slash state spending and turn around a deep fiscal deficit, moves that were cheered by markets. It devalued the peso currency sharply, which will stoke inflation already near 150pc.

“The measures are good in theory to fix the economy but caught in the middle many people are going to suffer because of it,” said Agustina Ferreira, a shop worker in the Argentine capital. Inflation is set to rise sharply in the months ahead, eroding people’s savings and spending power. Planned cuts to subsidies will push up energy bills and transport costs, while the spending cuts will drag on economic growth.

The devaluation has overnight knocked over half the official value from people’s pesos in dollar terms, though in reality tight capital controls already meant access to foreign currency was limited and people paid high rates on parallel markets.

Published in Dawn, December 14th, 2023