Milei Says Argentina Heading for ‘Shock’ Fiscal Therapy in 2024

(Bloomberg) — President-elect Javier Milei promised economic shock therapy to balance Argentina’s budget next year in an effort to avoid hyperinflation.

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Fresh off his landslide election win, Milei said Tuesday evening he will drastically cut government spending because “there’s no money.” Failure to do so would further boost consumer prices that are already soaring more than 140% a year, their fastest pace since the South American nation was exiting its last bout of hyperinflation in the early 1990s.

“If we don’t do the fiscal adjustment, we’re going to hyperinflation,” he said in an extensive radio interview. “I’m going to do a shock adjustment.”

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Milei provided few details of how he would balance the budget, saying his still-unnamed economic team would tackle the central bank’s balance sheet of short-term debt. He added that interest payments on peso bonds made by the central bank amount to 10 percentage points of gross domestic product.

In the interview, Milei insisted that spending cuts wouldn’t affect ordinary citizens but rather the political class and its allies. He indicated that public works projects would need private capital.

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The president-elect met Tuesday with outgoing President Alberto Fernandez at the official residence outside the city of Buenos Aires to start the government transition. He said he joked with Fernandez about becoming the next “tenant” at the property, but then didn’t spare his administration of criticism, saying its excessive spending “planted hyperinflation.”

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“There’s a very clear mandate,” Milei said in the interview. “My commitment to Argentines is to exterminate inflation.”

If not, he added, Argentina would end up like Venezuela.

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