BUENOS AIRES (Reuters) - Argentine President Mauricio Macri on Thursday vetoed a bill passed in the early morning hours by the Senate that would freeze energy and water prices, as political tensions deepen in the economically ailing country.

Argentina's President Mauricio Macri gestures during a news conference at the Olivos Presidential Residence in Buenos Aires, Argentina May 16, 2018. REUTERS/Agustin Marcarian

The measure could have derailed Macri’s plan for cutting the fiscal deficit he inherited from his predecessor, Cristina Fernandez, a free-spending populist who governed for eight years and is now a senator.

Macri’s cabinet chief, Marcos Pena, told reporters that Macri rejected the measure as soon as it reached his desk.

“Argentina has to make a more of an effort to get closer to having a balanced budget,” Pena said. “The law that limits utility price increases is vetoed.”

Macri, elected in 2015 on a pro-investment platform, has cut utility subsidies, forcing Argentines to pay higher monthly bills. His fiscal belt-tightening program has not gone down well with members of the Peronist opposition, particularly those allied with Fernandez.

In a 37-30 vote, the Senate gave final legislative approval to the price freeze bill. Pena called the law “irresponsible.”

But opposition lawmakers argued it was a lifeline for Argentines on fixed incomes.

“The utility hikes, together with increasing inflation, have had the most impact on our salaried workers, to say nothing of retirees and pensioners, whose incomes do not increase alongside rising tariffs,” said Senator Ines Blas said during the debate that preceded the vote.

The country’s 2019 fiscal deficit target of 2.2 percent of gross domestic product will be cut as part of a renewed belt-tightening effort by the government as it negotiates a standby loan deal with the International Monetary Fund. The IMF agreement may be conditional upon tighter fiscal policies.

This month, the government cut Argentina’s 2018 deficit goal to 2.7 percent of gross domestic product from 3.2 percent.

The peso lost 17.6 percent of its value in May before settling at 24.9 to the U.S. dollar.

Weak Argentine fundamentals, including 25 percent inflation, combined with a worldwide selloff in emerging markets to punish the local currency. More foreign exchange turbulence may lie ahead as opposition resistance stiffens in the months before Macri’s expected re-election campaign next year.