The stabilization plan will be tested during the next year. in the middle of the social pressures and the tussle with the provinces that usually trigger elections, the government will face the challenge apply a larger-than-expected fiscal adjustment to comply with the IMF. These are new expenditure ceilings with an eye to items for beneficiaries of social plans, users of public services and pensioners.
In its latest review, the Fund approved third-quarter targets and authorized a disbursement of nearly $6 billion, but also strengthened the path to reduce the primary deficit from 2.5% in 2022 to 1.9 % of GDP in 2023. Spending was higher and collections lower than expected in 2022, the agency estimated that sA reduction in primary expenditure of 1.8% of GDP will be required, instead of the 1.3% previously envisaged.
According to the personnel document, the cut will affect social assistance (0.8% of GDP) through the abandonment of emergency bonds and the segmentation of beneficiaries; subsidies (0.6%) in the energy, water and transport sectors; retirements due to mobility formula and non-renewal of moratoriums (0.2%), public salaries due to hiring freezes and transfers to the provinces (0.1%, in any case).
In hard numbers, That’s a pruning of $1.36 trillion, about $380,000 million more than the $980,000 million calculated in October. “These high-level measures are needed to protect priority infrastructure projects, absorb the extraordinary costs of conducting the presidential elections (close to 0.2% of GDP), but also to facilitate recovery beyond 2023 and support debt,” they said. said the technicians.
The Fund’s report highlights the moderate expansion of real spending (up from 14% yoy in May to 3.8% in October) and the “robust” performance of funding, with +4% yoy in October due to the impact of the soybean dollar, the increase in Earnings and non-tax proceeds. However, the absence of these engines in the coming months has led the agency to estimate a lower collection in 2023 and compensate for this bump with greater savings.
In Economy they know that the first and second quarters will be key to setting expectations and keeping the market calm ahead of the electoral race. The official diagnosis is that a fiscal deviation will put pressure on the issuance of pesos or the issuance of debt in that currency and will affect parallel dollars. For this reason, Sergio Massa’s team has promised to fix a deficit ceiling of 0.3% of GDP until March and 0.8% until the end of June.
The fiscal strategy will pass reduce tariff subsidies, with high-income groups and businesses being removed entirely in February 2023, after some delays in re-registration. “Meanwhile, for low- and middle-income residential users, rates will actually increase in February 2023 by 80% and 40% of the coefficient of wage variation, respectively (expected to be around 100%),” the IMF said.
As for social spending, the agency expects a further reduction in Potenciar Trabajo, which saw an increase in beneficiaries from 200,000 in 2015 to 1.35 million in 2022. After blocking access to the program in November and eliminating 20,000 plans for alleged irregularities, the Government has promised to make new withdrawals at the beginning of 2023 and is moving forward on a plan to reduce the benefit to those who receive other aid.
In turn, the Fund has acknowledged greater social unrest due to spending restrictions and falling real wages, and has repeatedly warned of the “risks” of the program, amid tensions with piquetero groups over demand for food and tools . “Civil unrest could escalate further, weakening political support for the program and leading to deviations and interventionist measures, especially before the elections,” the staff said.
Source: Clarin
