The 2023 Budget will bring strong cuts in public spending. Among the items that will be most affected by the adjustment are benefits and social security subsidies, while the payment of the debt will be one of the items that will expand the most.
An analysis by Nadin Argañaraz, director of the IAAF, points out that the national government expects that 2023 will close with a total expenditure of 30,328,120 million dollars, 71.6% more than the 2022 fiscal close.
In fact, this implies that the budget that has begun to be discussed in Congress It comes with a true 2% cut from inflation.
Analyzing the composition of expenditure in 2023, it can be seen that excluding the payment of debts, the adjustment is even greater. “Primary expenditure expects a greater reduction, of 3.4% real on an annual basis. The smaller real decrease in total expenditure is due to the fact that interest on debt would increase by 15.8% in real terms in 2023 compared to 2022 “.
Argañaraz explained that “the spending cut does not concern everyone. Capital transfers to the provinces and wage expenditure would increase. Expenditure on operating deficits of public companies, goods and services, real direct investments, current transfers and benefits of social security “.
When considering each type of expenditure, it is observed that current transfers, which include shipments to provinces, universities and economic subsidies for the private sector, they are those that show the greatest real fall, of the order of 14%.
This adjustment includes the cutting of tariff concessions, which will make bills more expensive for users but at the same time will allow to reduce public spending for current transfers.
The IAAF specifies that the expenses that would grow in real terms would be real direct investments (21.7%), property income –debt payment- (15.8%)and social security benefits which mainly contain contributory and non-contributory pensions and pensions (3.4%).
Adjustment and recession
Although the government shuns the expression “adjustment” and prefers to soften the cut in the euphemism of “game reassignment “some allies of the ruling party put their finger on the sore point: this is the case of the former director of Banco Nación Claudio Lozano, displaced when Silvina Batakis became president of the institution.
“The 2023 draft budget reflects the decision of Minister Massa of to deepen the fiscal and monetary adjustment putting the economy into recession in the second half of the current year, “Lozano said in a document from the Institute of Public Policy and Thought.
The document specifies that debt services are the main component of spending, as they represent 16% of total public expenditure. And he points out that the deal with the Monetary Fund has not solved the problem.
“The growing reliance on local currency borrowing has become a problem that is also stifling public finances and it raises the subordination of government management to the financing that the main agents of the internal market decide to grant it. We report this due to the total debt services exposed, 15% is in dollars and the rest is in local currency. “
Also from the Research and Training Center of the Argentine Republic (CIFRA), connected to the official Central of Argentine Workers (CTA), they note that the 2023 budget goes hand in hand with the adjustment.
The calculation of the CIFRA is that the reduction of primary expenditure at constant prices it will reach 3.7% of GDP next year. They anticipate “a sharp cut in economic services with an emphasis on energy and transport”, together with the “deficit of public companies and purchases of goods and services”.
In the draft of the 2023 Budget, Minister Sergio Massa’s team moves on a fragile table, between the political instances of Kirchnerism and the need to adapt to keep the agreement with the Fund alive.
The objectives pursued with the IMF provide move from a primary deficit of 2.5% of GDP by 2022 to a red of 1.9% by 2023.
For the consulting firm FMyA, this result will be achieved through a cut in spending that will also try to cover the decline in revenues, in a year of lower economic activity.
“The 0.6 point drop in the government deficit stems from a 1.2 point drop in spending, largely due to the cut in subsidies (1% GDP) and a little salary. On the other hand, revenue will drop by 0.6% of GDP, without changes or new taxes, but slight decrease in the collection of withholding taxes, Profits and COUNTRY“, underlines FMyA.
AQ
Source: Clarin
