Home Business The IMF expects spending cuts of $ 350,000 million by 2022

The IMF expects spending cuts of $ 350,000 million by 2022

The IMF expects spending cuts of $ 350,000 million by 2022

The IMF expects spending cuts of $ 350,000 million by 2022

Economy Minister Martín Guzmán will meet on Friday with the head of the IMF. Photo: Ministry of Economy

Because of the agreement with the IMF, the government will face greater budget restrictions this year. One of the main goals is to reduce the basic deficit to 2.5% of GDP and to meet this goal, the agency predicts in its estimates. decrease in primary spending of 0.5 points of GDP in 2022, equivalent to approximately $ 350 billion.

The figures come from a staff report published after program approval in March. There, a collection of 18.2% of GDP is expected this year, unchanged compared to 2021, sustained by the resumption of payment of deferred pandemic taxes and social security contributions for the recovery of wages and employment.

On the expenditure side, a decrease of 21.02% to 20.7% of GDP is expected due to a reduction of subsidies (0.8%), products and services, shifting to the provincespublic companies and universities, social subsidies, which fall into the “other” category (0.6%), and spending on Covid (0.5%), which have already had significant reductions after the removal of the IFE approved by Congress in 2021.

The March staff report forecasts a reduction in primary spending from 21.2 to 20.7% of GDP in 2022. Source: IMF.

The March staff report forecasts a reduction in primary spending from 21.2 to 20.7% of GDP in 2022. Source: IMF.

According to Fund projections, the wages of public employees will remain unchanged this year in relation to GDP and pensions will increase (0.5%), while capital spending will increase (0.6%) due to the “reorientation” of current funds towards infrastructure. Since the increases do not compensate for the decreases, the result is a decrease in spending of 0.5 points of GDP.

In the chicken, these are $ 350,000 million or a bonus and a half as announced on Monday, whose financial cost reached $ 200,000 million. Reinforcement similar to IFE aims to mitigate the effects of inflation on the income of weak sectors and will not affect the fiscal objective, as it will be financed by larger collections, according to the Economy Minister.

Martín Guzmán has been in Washington since Tuesday and spoke with staff to “recalibrate” the program as a result of the war’s impact on inflation and energy subsidies. Fund expects new fiscal measures -it has already sent a wink in favor of taxes extraordinary income – to maintain goals.

One of the sensitive points is the review of spending, something that brings tension to Kirchnerism, some portfolios of the Executive and of the governors. Guzmán promised it would rise moderately above inflation, reducing spending on Covid. Now, if that item is calculated in comparison to 2021, the expected result is a decrease.

“Everything has been prepared and recalibrated”, they confirmed to the environment minister. And when asked about the cost, they assured that “it’s towards that reduction.” The head of the Treasury announced on Monday that the fiscal, monetary and reserve criteria for the first quarter were met during the presentation of the emergency bond at Casa Rosada.

The first review of accounts was in May, a requirement to obtain the second disbursement from the IMF. The agreed schedule was provided for the Budget revision in accordance with the program for April 15, but in Economics they insisted the date was “estimated” and ratified that it would be released by law, which would allow Congress to avoid.

Amid concerns over rising growth rates, economists see difficulties in meeting the fiscal goal in 2022.It is difficult for them to achieve a reduction in spending in real terms, in the best cases the level of subsidies will not change.for the most part it may have shrunk a bit due to GDP growth, but not 0.8%, ”he said Federico Molldirector of Ecolatina.

Analysts believe expected inflation – about 60% – will partially end pensions, wages and social spending, a breakdown that bonds cannot recover. However, they see room to reduce spending. If Guzmán fails to make financial guidance more flexible — as Kirchnerism demands—, public works and transfers could be targeted.

Lower growth in turn puts a ceiling on revenue. “The reduction of the deficit depends, therefore, on the reduction of expenditure that the program projects 0.5% of GDP by 2022, focused on subsidies, social assistance, relocation to the provinces and purchase of goods and services, ”said the Center for Research and Training (CIFRA), of the CTA .

Source: Clarin


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