New President Milei warns of painful measures such as reducing the value of the currency, cutting subsidies and canceling public construction tenders.

Argentina’s government has announced plans to slash the value of its currency, the peso, against the U.S. dollar by more than 50 percent as its new far-right president seeks radical solutions to tackle the country’s worst economic crisis in decades.

President Javier MileiThe country’s economy minister announced the painful measure on Tuesday, saying it was necessary for Argentina to “avoid a catastrophe.”

The devaluation would see the value of the peso drop from 400 per dollar to over 800 per dollar, a blow to tens of millions of Argentines already struggling to make ends meet.

Economy Minister Luis Caputo announced a series of further austerity measures, including sweeping subsidy cuts, the cancellation of tenders for public works projects and plans to lay off nine ministries.

However, the government plans to double social spending for the poorest to help them absorb the economic shock.

“For a few months we will be worse off than before,” Caputo said in his televised address.

“If we continue as we are, we are inevitably heading towards hyperinflation,” he said.

“Difficult pill to swallow”

The planned measures were praised by the International Monetary Fund (IMF), to which Argentina owes $45 billion, but sparked sharp criticism from some progressive activists.

Left-wing activist Juan Grabois said Caputo “declared a social murder without batting an eyelid, like a psychopath who wants to massacre his defenseless victims.”

“Your salary in the private sector, in the public sector, in the national, social and solidarity economy, in the cooperative or informal sector, for pensioners and retirees will give you half that in the supermarket,” Grabois said. “Do you really think people won’t protest?”

Jimena Blanco, principal analyst at risk consulting firm Verisk Maplecroft, said Milei’s government is trying to mitigate an otherwise guaranteed economic crash landing.

“He promised a very hard pill to swallow and he delivers that pill,” she said. “The question is how long the population’s patience will last in waiting for a change in the economic situation.”

Economic shock

The economic reform is part of the new strategy of Milei, who was sworn in on Sunday and has aggressively sought to address the budget deficit, which he says is at the root of Argentina’s economic problems.

A self-described Milei is “anarcho-capitalist” and argues that severe austerity measures are needed to put Argentina back on the path to prosperity and that there is no time for an incremental approach. However, he promised that any adjustments would almost exclusively affect the state and not the private sector.

Argentines, disillusioned by skyrocketing inflation and a 40 percent poverty rate, were surprisingly receptive to his vision.

Still, Milei’s roadmap is likely to face stiff resistance from lawmakers in the left-leaning Peronist movement and the unions it controls, whose members have said they refuse to forego wages.