(Bloomberg) — Argentina devalued the peso by 54%, overhauled its crawling peg and announced massive spending cuts to eliminate its primary fiscal deficit next year as the first steps in President Javier Milei’s shock-therapy program. 

The newly inaugurated administration weakened the official exchange rate to 800 pesos per dollar, Economy Minister Luis Caputo said in a televised address after the close of local markets on Tuesday. It was 366.5 per dollar before the address. The central bank will henceforth target a monthly devaluation of 2%. 

The moves were welcomed by the International Monetary Fund. The central bank is scheduled to announce new monetary measures on Wednesday. 

"There is no more money,” Caputo said repeatedly in the recorded video, adding that Argentina needs to solve its “addiction” to fiscal deficits.

The government will slash spending equivalent to 2.9% of gross domestic product, in a radical fiscal adjustment, according to a senior economic official.  

Cuts to energy subsidies will save the 0.5% of GDP, while reductions to transport subsidies will save 0.2%, according to the government’s estimates. The administration also expects reductions in social security and pensions to save an additional 0.4% of GDP. The government plans to end indexation of pension payments, the official said. 

The finance ministry also expects tax revenue to grow by 2.2% next year. 

Other measures announced including halving the number of ministries, cutting transfers to provinces and suspending public works. At the same time, Argentina will boost certain social welfare programs, Caputo said.

The IMF praised the new government’s “bold initial actions” shortly after Caputo’s announcement. “Their decisive implementation will help stabilize the economy and set the basis for more sustainable and private-sector led growth,” spokesperson Julie Kozack said in a statement.