Tuesday, July 16, 2024

ARGENTINA | 28-06-2024 14:22

President Milei hails ‘historic’ approval of his economic reform package

President Javier Milei celebrates "historic" and "monumental" approval of his sweeping reform package by Congress.

President Javier Milei has celebrated Congress’ decision to approve his sweeping ‘Ley de Bases’ reform package intended to liberalise and deregulate the economy, describing the news as “monumental.”

Milei, 53, said he would now push for further changes, including a “change of monetary regime.”

"The ‘Ley Bases’ is a historic and monumental milestone,” the La Libertad Avanza leader said in an interview with the LN+ news channel. 

“A new stage begins. Fiscal consolidation is underway, the stage of zero deficit is over, now we are going to the stage of zero emission, the change of monetary regime is coming," said, without providing further details.

Argentina has had strict capital and currency controls in place since 2019, with multiple exchange rates.

By 147 votes to 107, with two abstentions, the lower house Chamber of Deputies approved early Friday morning a package that grants Milei extraordinary delegated powers for a year, as well as a new foreign investment scheme, the easing of labour laws and authorisation to privatise around a dozen public companies, among other changes. 

He also obtained approval to broaden the taxpayer base, reinstating income tax and a levy on personal assets.

The International Monetary Fund, with which Argentina has a US$44-billion loan programme, welcomed the passage of the legislation.

"We welcome congressional approval of key fiscal and structural legislation, as well as measures to strengthen the monetary policy framework. These aim to improve the quality of the fiscal consolidation, further reduce inflation, and support the economic recovery," wrote IMF Spokesperson Julie Kozack on the X social network.

"We continue to engage constructively with the economic team on policies to create a more prosperous and stable Argentina," she added.

Argentina is going through a severe recession with GDP expected to contract by around 3.5 percent this year. The economy shrank by 5.1 percent year-on-year in the first quarter, with inflation running at an annual 280 percent. Half of the population currently lives in poverty, according to private studies.

Milei said that "the second stage of my government is coming” and promised to "put a definitive end to the problem of inflation,” which has wracked the lives of Argentines for decades.

He also anticipated the upcoming creation of a new ministry "whose mission will be to continue with the reform process." The portfolio will be headed by economist Federico Sturzenegger, former head of the Central Bank during the government of the right-wing former president Mauricio Macri (2015-2019).

Regarding dollarisation, which Milei said on last year’s campaign trail was his ultimate goal, the President said the process would happen"naturally" on the basis of "currency competition.”

Having obtained the laws he demanded, the government now urgently needs to show economic progress if it is to preserve support which, despite the recession, still stands at around 50 percent, according to polling data.

Since taking office last December, the government's main goal has been to achieve “fiscal balance,” which it reached in the first quarter when it recorded a budget surplus, the first since 2008.

However, that resulted in the paralysis of public works projects, thousands of lay-offs, a massive collapse in consumption, fall in pensions and a plunge in purchasing power, which sparked social protests and two general strikes by unions.



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