After the devaluation in December and the jump in inflation to 25.5% – the highest level in the last 30 years -, the government estimates that poverty is already close to 50% of the population. The number, which had not been recorded for two decades, appears in the letter of intent submitted by Argentina for the IMF staff report approved last week.
The document signed by the Minister of Economy, Luis Caputo, and the head of the Central Bank, Santiago Bausili, indicates that Javier Milei’s management is drawing up a plan “New Way” which “unlocks the power of the markets”, but warns that it will receive it “the worst legacy in history”given by the fall in wages and the increase in informality and poverty.
“Currently, more than 50% of Argentines live below the poverty line, and this figure is close to 60% in the case of children,” the officials specified in the letter dated January 18th. The data represents a difference of 5 points compared to the preliminary estimates made by the Fund itself based on World Bank models.
In its report, the organization warns that “Argentina has experienced a trend increase in poverty“, and that this measurement “has increased by around 45% more recently, driven by rising prices of the basic consumption basket (190% year-on-year through November) and falling real wages of informal workers (20 % on an annual basis through November) annually in October)”.
The latest INDEC data demonstrates this, poverty it was 40.1% in the first half of the year (about 18.5 million people), almost 4 points more than in the same period of 2022. Then, inflation accelerated due to the August devaluation, but poverty fell to 38-39% in third quarter thanks to the postSTEP measures, then increased 6 points in the fourth quarter, according to the UCA Social Observatory.
According to the Fund, Argentina has a “large” social safety net, with a fiscal cost of 3.7% of GDP. AUH reaches 4 million people; family allowances, 5.5 million; drug benefits for PAMI pensioners, 4 million; the Alimentar program, at 2.3 million; Argentina jobs, at 1.3 million; and Progresar scholarships, at 1.8 million.
However, with inflation at 25.5% last month and rate increases of up to 200% in February according to the agency’s projections, the staff report argues that the program “must include a temporary extension of specific social assistance protect the most vulnerable from the initial burst of inflation and contraction in activity.
The president had already announced it “Difficult months are coming” before the devaluation in December, which aggravated the decline in income and pensions. Now, worried about inflation, the government has postponed the gas tariff increase scheduled for February 1, divided the fuel tax increase into two phases and finalized whether or not to accelerate the official dollar.
“With an increase in prices in December, when people will have to cover the January basket with December income, poverty is expected to increase even more and approach 50%, while destitution would have increased, but not in significantly due to the doubling of prices. the AUH or the improvement of the formal wage”, said Agustín Salvia, director of the Social Observatory of the UCA.
Experts agree that poverty has not increased further due to the recession it has not yet had an impact on employment, especially in the informal sectors. “Without a doubt poverty has increased, it is the opposite of income, if income decreases, poverty increases, in this period it is linked to inflation, it is not yet due to unemployment,” said Luis Beccaria, an economist at UBA.
For Salvia, the most affected groups are young formal families without children, working adults with older children and pensioners. In the case of the elderly, the economist Marina Dal Poggeto estimates that if the government maintains the current mobility formula, the adjustment in that sector could reach 1.8% of GDP, more than four times what was forecast by the Ministry of ‘Economy.
Source: Clarin
