BUENOS AIRES – An executive order issued on Monday requires “all jurisdictions and national state entities” in Argentina to “invest temporary excess liquidity funds via purchases of notes” issued by the Treasury for a term of no more than 180 days.
The order, which does not cover “public banks, the national executive branch or the judicial branch,” was issued “as a result of the financial and exchange instability being experienced by the economy,” the government said.
Following the governing party’s disastrous showing in the Aug. 11 primary elections, Argentina, which was already in a recession, experienced extensive turmoil in the financial markets and the peso crashed against the US dollar on the foreign exchange market.
“One of the most pressing needs is to ensure continuing short-term fiscal financing while the other measures implemented generate the effects needed to regain access to means of financing that are not accessible at this time at reasonable costs,” the executive order, which was published in the Official Bulletin, said.
Argentina’s gross domestic product (GDP) fell 2.5 percent in 2018, according to the latest official figures available, and the economy contracted 3.1 percent on a year-on-year basis in the January-May 2019 period.
The recession has been accompanied by a 47 percent inflation rate in 2018 and an inflation rate of 25.1 percent during the first seven months of this year.
President Mauricio Macri, meanwhile, said during a campaign rally on Monday that his administration was cutting to “zero” the tax payments that employers were required to make for each new hire in 2020, with the tax rate slashed in half in 2021.
Macri said the decision to slash taxes was aimed at “protecting the employees who exist today” since the benefits would only apply to “the firms that increase the number of jobs.”
“Today, 2 million people are looking for work and can’t find it, in part, because of the high cost of hiring ... Argentina is the country in the region with the biggest gap between what the employer pays and what the employee receives,” Macri said during a visit to a factory in Buenos Aires province.
The 60-year-old Macri said he planned to announce additional economic measures “in the next few days.”
Earlier this month, the International Monetary Fund (IMF) placed the September aid tranche for Argentina on hold ahead of the South American country’s presidential election.
The IMF’s decision has added to the climate of uncertainty as Macri prepares to take on Peronist Alberto Fernandez in the Oct. 27 election.
The Macri administration was expecting to receive $5.4 billion from the international financial institution this month, a tranche that was part of the $56.3 billion stand-by agreement signed with the IMF in mid-2018 just before the country entered into recession and had to deal with the exchange crisis.
In the Aug. 11 primaries, Fernandez, who contends that the IMF shares responsibility for the economic crisis, finished 15 percentage points ahead of Macri.
Under the terms of the stand-by agreement signed with the IMF, the Macri administration had to impose sharp budget cuts.
Argentina’s next president will be sworn in on Dec. 10 for a four-year term.