Macri to IMF: Will Freeze Hires and Slash Subsides For You

In a letter of intent sent to the IMF Thursday, the Mauricio Macri administration promised to narrow its fiscal deficit by 1.3 percent and make the central bank independent to achieve budgetary targets.

The administration says it will present an “appropriately conservative” budget to Congress by October that includes a freeze on hiring federal civil service employees for two years and ensure gas and transportation subsidies are phased out.

“Non-crucial” public works will be eliminated, and tax cuts can be delayed, if the IMF wants, the Argentine government assured their international backers in the letter.

The Macri administration reintroduced the country to the IMF earlier this month in a last-ditch effort to salvage the country’s collapsing economy. The Argentine pesos dipped some 25 percent between late April and mid-May prompting the central bank to sell off millions of pesos and suddenly spiked interest rates.

The communique promised to maintain minimum social assistance spending of 1.3 percent of GDP, noting previous fiscal reforms hurt “society’s most vulnerable. … We will not make this mistake,” the letter read.

Over the past year, the government already slashed subsidies and jobs to the continued protest of unions and social organizations. Since November alone gas, water, and electric rates have increased an average of 1300 percent and around a thousand government employees have been let go since December.

The government said these measures should be “adequate to achieve the macroeconomic and financial objectives of the program,” but promised to “take any additional measures that may be appropriate for this purpose” to please their financiers during the three-year deal.

The government’s plan seemed to be immediately backfiring as on Thursday the Argentine peso fell another two points ending at 28.15 to the dollar and the government announced that inflation has maintained at 26 percent for an entire year.