The Government continues to review the numbers and evaluate subsequent measures leap into the void that involved negotiating the fiscal adjustment in Congress. Without the support of the governors, the Minister of Economy, Luis Caputo, prepares a further spending cuts to compensate for the fall in the fiscal package envisaged by the omnibus law and reach the “zero” financial deficit agreed with the Monetary Fund.
“If we have to give up income, Of course we will have to reduce expenses, including the nation and also revenues. “It’s all that constitutes the fiscal package, we will withdraw it, we will evaluate new measures and we will try to reach a consensus on them with governors and legislators in the future,” the official said in a press conference on Friday. conference from Casa Rosada.
This is a different roadmap from the one presented in December, when he launched a series of announcements, and without the – immediate – political support that he had promised both the White House and the IMF. This is why, according to sources from La Libertad Avanza, the Executive is studying a new tax invoice for later. Tomorrow there could be news at the meeting of the ruling bloc.
In parallel, Economy began reviewing entries ranging from discretionary transfers to provinces for tariff subsidies and pension benefits. The aim is to counterbalance the reversal in the increase in withholding taxes, the increase in the minimum income tax threshold and money laundering, as well as the failure of the new pension formula in the omnibus law. In total, almost 2 points of GDP.
Caputo aimed to eliminate the financial deficit, which last year had reached 6.1% of GDP, almost a point above the 5.2% expected by the minister. This result, caused by a primary deficit of 2.9% and the jump in interest on the debt to 3.2% due to the indexation of the securities by weight to inflation and the dollar, adds further difficulties to the government.
In this context the minister’s announcement on Friday it has generated uncertainty and disorientation among some governors and allied blocs. No wonder: provinces could lose a fund of nearly $2 billion, which is the discretionary resources they receive from Treasury grants, national programs, superannuation funds and public works, among others .
The district that would be most affected in the event of a cut in funds outside of the sharing is the province of Buenos Aires. Caputo will have more power to the Ministry of Infrastructure under its orbit, after the displacement of Guillermo Ferraro. They could also freeze the advance share distribution and increase the fuel tax.
Another key element will be subsidies. Tomorrow there will be the second hearing to define the new electricity tariffs and the transporters will present their requests, while on Thursday the increase in tariffs on transport and gas of up to 600 and 250% respectively is expected to come into force. The Government has yet to finalize the removal of subsidies, which could further increase rates.
Pensions would also be reached by the “plan B” of the fiscal adjustment, since the current formula (which takes salaries and receipts from previous months) allows for a lower salary expense. Caputo wanted to do it with a mechanism adapted to inflation, without considering the month of January, because the current system – they say – is harsher, even if if inflation fell the deficit reduction would be reversed.
Although the Minister of Finance, Pablo Quirno, was tasked with ratifying over the weekend that ““The goal of zero financial deficit remains immovable”, some economists – including the minister – believe it is increasingly unlikely that the desired balance can be achieved. Future disbursements depend on this objective, such as the 4.7 billion dollars that the IMF will approve this Thursday.
Source: Clarin
