MercoPress. South Atlantic News Agency

Macri announces measures to cut taxes and prop consumption hopefully to brighten Argentine pockets

Macri said he would raise the minimum wage, temporarily freeze gasoline prices and increase the income tax bracket floor by 20 per cent

Argentine President Mauricio Macri on Wednesday unveiled a package of welfare subsidies and tax cuts for lower-income workers to lessen the impact of an economic crisis just months before a re-election bid, but his announcement did not halt the peso currency's collapse.

Amid signs that Argentines are already cutting back on buying goods due to a currency crash this week, the peso closed 7.1% weaker on Wednesday to reach 60.2 per US dollar.

The peso has lost a quarter of its value since Monday due mostly to market concerns that opposition candidate Alberto Fernandez will bring back interventionist economic policies if he wins October's presidential election as looks likely.

Argentina is currently suffering a recession and an inflation rate of 55%.

Macri said he would raise the minimum wage, temporarily freeze gasoline prices and increase the income tax bracket floor by 20 per cent. That would allow a tax cut for two million workers worth some 2,000 pesos (US$33) per month per person, the government said.

Better known for austerity measures earlier in his time in office, Macri said the government will now give subsidy payments of 1,000 pesos per child for unemployed people with children before the end of the year. The minimum wage increase will be determined later.

Macri came to power in 2015 on promises to kick-start Latin America's third-largest economy via a liberalization wave but inflation is at 55%, the country is in recession.

Fernandez, whose victory in primary elections on Sunday was seen as the most immediate catalyst for the peso crash, warned that Argentina could run out of foreign currency reserves.

“Because of the seriousness of the situation, the risk is that we end up without reserves and that the Fund ends up turning its back on us,” the presidential candidate told El Destape Radio, referring to Argentina's US$57-billion standby agreement with the International Monetary Fund.

In September the IMF is scheduled to deliver another tranche of the loan. IMF has restrained from any public comments on the Argentine situation and the austerity measures it sponsored and demanded in exchange for the financial support.

“The measures I take and that I am going to share with you now are because I listened to you, Macri said in a video statement announcing his new measures.

He said gasoline prices would be frozen for 90 days as part of his plan. The new measures will cost the government about US$678 million, the government said.

”These are measures that will bring relief to 17 million workers and their families,” Macri added.

Macri's previous austere public spending policies were liked by the bond market but they have proven disastrous for his popularity among middle- and low-income Argentines struggling to pay electricity and heating gas bills that surged after the administration cut subsidies.

Sales of goods from cars to food and beauty products have slowed in recent days, as suppliers hold back shipments while trying to calculate how the weaker peso will affect consumer prices.

The new economic measures are seen as too little, too late in the eyes of some Argentines.

The meltdown in Argentina's currency, stocks and bonds on Monday was the worst since the South American country's 2001 economic crisis and debt default.

The peso hit an all-time low Monday of 65 to the dollar, a drop of 30% before recovering partially.