New Austerity Moves Effected by Argentina

The Argentine government Friday devalued the nation’s currency and announced a new series of economic austerity measures to halt a surge of inflation.

Economy Minister Juan Sourrouille, in a nationwide speech, said the new measures include a 3% devaluation of the austral, a 1% cut in interest rates and new limits on price increases for industrial goods.

“This group of policies is generally aimed at gaining a rapid control over the growth of costs and aggregate demand, to give a new and firm impetus to the fight that we have been waging against inflation,” he said.

Over the past 24 hours the government has also ordered 3%-10% increases in charges for public services.

Sourrouille is the main architect of a 13-month-old anti-inflation program which at first used wage and price controls and a large transfer of resources to the public sector to stem raging inflation.

Over the plan’s first year, inflation fell to 50% from the previous 1,228% annually, but inflation surged in July and Sourrouille said this month was worse.

The renewed inflation was caused by wage and price hikes after controls were loosened in April, seasonal food supply problems, and a “permissive monetary policy,” the minister said.