BUENOS AIRES—President Mauricio Macri on Sept. 3 announced new taxes on exports in the world’s third-biggest soy producer and steep cuts to government spending in an “emergency” bid to balance next year’s budget as his center-right government aims to persuade the IMF to accelerate a $50 billion loan program.

The new austerity measures, announced by Macri and Finance Minister Nicolas Dujovne, were prompted by a 16 percent slide in the value of Argentina’s peso last week, bringing the local currency’s losses to almost 50 percent against the dollar so far this year.

The peso traded down 4.39 percent at 38.70 per dollar after the government’s announcement.

About half of next year’s deficit reduction will come from spending cuts. But almost all the increased revenue will be funded with an export tax of 4 pesos per dollar on exports of primary products, including agricultural goods, and 3 pesos per dollar on other exports, Dujovne said.

Macri, a free-market advocate, had cut agricultural taxes upon taking office in 2015 in a bid to “normalize” the economy after eight years of heavy state intervention under his predecessor, Cristina Fernandez.

“We know it’s a bad, terrible tax that goes against what we want to foster: more exports to create more quality jobs,” Macri said in a televised national address. But “it’s an emergency,” he added, promising to get rid of the tax once the economy stabilizes.

The new taxes might delay international shipments of grains from Argentina—the world’s No.1 exporter of soymeal and soyoil and a top shipper of raw soybeans and corn—as farmers and export companies monitor the exchange rate for the best time to sell.

Investors have sought determined action from Macri’s government to close its budget gap amid concerns that a recession this year and the sliding currency would leave the government struggling to service its debt, most of which is in dollars.

Dujovne is due to hold talks on Sept. 4 in Washington with senior International Monetary Fund officials to discuss accelerating disbursements from a deal reached in June.

Argentina’s economic woes have revived painful memories of a 2001-2002 economic crisis that plunged millions into poverty and shook the faith of international investors in Latin America’s third-largest economy.

‘Has to Be The Last’ Crisis

The contraction of the Argentine economy this year will be steeper than the 1 percent recession projected, Dujovne said.

Repeating “We cannot keep spending more than we make” throughout his speech, Macri warned that poverty would rise due to inflation running at more than 30 percent. But he asked his countrymen to be patient with efforts aimed at ending decades of recurrent economic crises in Latin America’s No. 3 economy.

“This is not just another crisis. It has to be the last,” Macri said.

The government said it would bolster social programs such as child welfare, reduce the number of ministries to 10 from 19, and slash next year’s capital spending—which supports infrastructure development—by 27 percent.

The measures announced on Sept. 3 will allow the country to achieve a primary fiscal surplus of 1 percent of GDP by 2020, Dujovne said.

One trader said the market was skeptical the new fiscal targets can be achieved.

Economic analysts had mixed reactions to the announcements, with some saying they fell short of expectations and others warning they could fan political unrest next year.

But “talk about default is senseless even examining these numbers with pessimism,” said Federico Thomsen of Buenos Aires consultancy E.F. Thomsen.

A plank of Macri’s 2015 election platform was to cut the country’s fiscal deficit by reducing the expensive public utility subsidies favored by Fernandez.

But cutting those subsidies has put upward pressure on inflation by sharply increasing household electricity, heating gas and water bills, leaving Macri caught between voters tired of fiscal belt-tightening on one hand and investor pressure for spending cuts on the other.

Argentina has faced strong headwinds this year. A drought early in the season hobbled the country’s soy crop, and higher U.S. interest rates started drawing away investors while the Turkish lira crisis hurt emerging markets globally.

The peso’s slide, on the other hand, has benefited exporters, who are paid in dollars.

By Maximilian Heath & Luc Cohen

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