Argentina's Shock Therapy Since 2023

How President Javier Milei's government tried to end chronic inflation and deficits through sharp spending cuts and deregulation, and the debate over its costs.

Argentina has struggled with high inflation, repeated debt crises and large budget deficits for decades. In December 2023, Javier Milei, a self-described libertarian economist, became president promising radical change. His programme is one of the most closely watched economic experiments in the world.

The starting point

When Milei took office, annual inflation was over 200 percent, the government ran large deficits financed partly by the central bank, and the peso’s official exchange rate was far stronger than the rate on the parallel market. Poverty was high.

The programme

The government’s main steps included:

Devaluation: the official peso rate was cut by more than half in December 2023.
Sharp spending cuts: reductions in public works, transfers to provinces, subsidies for energy and transport, and the real value of pensions and public wages. Milei often symbolised this with a chainsaw.
Ending money-financed deficits: the central bank stopped printing money to fund the government.
Deregulation: removal of many rules on rents, trade and business.

Early results

The government achieved a budget surplus in 2024, Argentina’s first full-year surplus in over a decade. Monthly inflation fell from around 25 percent in December 2023 to low single digits during 2024, and annual inflation fell sharply over the following year.

But the adjustment was painful. The economy contracted in 2024, real wages and pensions fell steeply at first, and poverty rose sharply in the first half of 2024 before falling back as inflation eased. Critics argued the burden fell heavily on pensioners and public workers and that cuts to infrastructure could harm long-run growth.

Why stopping money printing matters

When a government covers its deficit by having the central bank create money, more pesos chase the same goods, pushing prices up. Once the budget moved into surplus and money printing stopped, one of the main engines of Argentina's inflation was switched off. That is why fiscal adjustment was at the centre of the plan.

The debate

Supporters see the programme as a necessary break from decades of unsustainable policies. Critics worry about social costs and whether the gains will last. Argentina’s history of failed stabilisations makes economists cautious. A key test is whether reforms can deliver sustained growth and not only lower inflation.

Thinking lower inflation means people immediately feel better off

Falling inflation means prices rise more slowly, not that they fall. After a period of rapid price increases and falling real wages, households may still feel squeezed until wages recover. Stabilisation often feels worse before it feels better.

Key takeaways

Javier Milei took office in December 2023 facing annual inflation over 200 percent.
His government devalued the peso, cut spending sharply and stopped money-financed deficits.
Argentina achieved a budget surplus in 2024 and monthly inflation fell dramatically.
The economy contracted and poverty rose at first, and the long-run results are still debated.