Argentina lowers key import tariff to ease inflation

Argentina is reducing a key import tariff to help curb inflation, as President Javier Milei faces the challenge of aligning economic policies that often conflict. Economy Minister, Luis Caputo, announced a reduction in the PAIS tax on imports, lowering it from 17.5 per cent to 7.5 per cent.

The Milei administration had initially raised this tax after taking office on December 10 to boost federal revenue and address a fiscal deficit, but the increase resulted in higher import costs.

Tackling inflation remains Milei’s top priority, especially after it soared to 26 per cent per month following a currency devaluation last December. Inflation has since eased to 4 per cent by July. Despite this, Milei’s austerity measures, including cuts to subsidies for home utilities and public transport, have sparked concerns about rising prices.

By reducing the import tariff, the administration aims to ease price pressures as it continues to phase out subsidies to lower inflation and close the fiscal gap. This move also reflects Milei’s campaign promise to reduce taxes, serving as a symbolic gesture to voters.

The tariff cut is part of a broader strategy to stabilise Argentina’s economy. The government is currently seeking to negotiate a new agreement with the International Monetary Fund (IMF) to replace the existing $44-billion deal. However, progress on these talks has been slow, and Milei continues to enforce currency controls on the peso, which many Argentines believe is overvalued.

As of July, the PAIS tax has generated 4.3 trillion pesos ($4.5 billion), making up around 6 per cent of Argentina’s total tax revenue. The reduction applies only to import tariffs, while other applications of the PAIS tax, such as currency exchange limits, remain unchanged.

Attribution: Bloomberg

Subediting: M. S. Salama