Argentina unveiled plans on Monday to raise export taxes on grains and slash the number of government ministries in a bid to balance its budget next year, as President Mauricio Macri seeks a deal with the IMF to accelerate a $50 billion loan program.
The new austerity measures, announced by Macri and Finance Minister Nicolas Dujovne, were prompted by a 16 percent slide in the value of the peso last week, bringing the local currency's losses to almost 50 percent against the dollar so far this year.
Investors were seeking determined action from Macri's center-right government to close its budget gap amid growing concerns that a recession this year and the sliding currency would leave the government struggling to service its debt, most of which is in dollars.
"This is not just another crisis. It has to be the last," said Macri in a televised national address, adding that the taxes on exports were an emergency measure that would be lifted once the economy stabilized.
He warned his countrymen that poverty levels would rise due to inflation running at more than 30 percent but said the government would make an effort to bolster some social programs, such as child welfare.
Argentina's economic woes have revived painful memories of a 2001-2002 economic crisis that plunged millions into poverty and shook the faith of international investors in Latin America's third-largest economy.
Dujovne said the measures announced on Monday would allow the country to achieve a balanced budget next year, excluding debt servicing costs, instead of a previous forecast of a 1.3 percent deficit. He said Argentina would achieve a primary fiscal surplus of 1 percent of gross domestic product by 2020.
Almost all the increased revenue needed to eliminate the deficit will come from an export tax of 4 pesos per dollar on agricultural exports and 3 pesos per dollar on other goods shipped internationally, Dujovne said.
The contraction of the Argentine economy this year will be steeper than the 1 percent recession already projected, he said.
Dujovne is due to hold talks on Tuesday in Washington with senior International Monetary Fund officials to discuss accelerating disbursements under the $50 billion standby financing deal reached with the fund in June.
Despite the IMF's backing, investors became jittery last week about Argentina's ability to pay its debts, prompting a stampede out of the peso.
Macri promised on Monday to intensify fiscal belt tightening by reducing the number of government ministries by half and taxing exporters, who get paid in dollars and have benefited from the peso's decline.
"Those who export will be asked to contribute more," Macri said in his televised address.
"We cannot continue spending more than we have, living beyond our tax revenues," he said.