Sergio Massa took office as Argentina’s Minister of Economy and announced measures to reduce the fiscal deficit and strengthen the Central Bank’s scarce reserves, but analysts criticize the measures’ lack of clarity and classify the announcements as mere expressions of desire.
Argentina’s new Economy Minister Sergio Massa announced a strong increase in electricity and gas tariffs as the main measure to reduce the fiscal deficit, and an agreement with exporting sectors to envision exports as the main measure to strengthen the shortage. The Central Bank stabilizes its reserves and thus the foreign exchange market.
The measures announced Wednesday night (3) form part of the strategy to achieve the goals of the financial agreement signed with the International Monetary Fund (IMF) in March, but analysts and economists see the announcements as “expressions of desire.” because they don’t specify “how and when” to apply.
Sergio Massa explained his goals, but did not explain how he would implement them or when they would be achieved. Without it, these are just expressions of desire,” he said. RFI economic analyst Damián Di Pace is director of consulting Focus Market.
Di Pace said, “What are the principles for the fulfillment of the announcements? How and when will the deficit be reduced? These are the questions asked by the economic units.”
recipe
The most concrete measure is the reduction of energy tariff subsidies, which would mean a sharp increase in electricity bills for all households consuming more than 400 kWh per month. The same will apply to natural gas bills, but the consumption limit, how much the increase will be, and when it will begin to prevail were not specified.
Economists calculate a 300% to 600% increase in surplus and warn of the impact of this increase on inflation, which should close the year around 100%.
“A huge ‘tariff’ that will have an impact on prices in the economy. It was the only tangible measure to control public spending to reduce the budget deficit, but a cut that affects people. No cuts in public sector spending. “, critical economist and MP José Luis Espert.
Massa guarantees meeting IMF targets
Sergio Massa assured that the government will achieve the goals of the agreement with the IMF, which creates a primary fiscal deficit of up to 2.5% of GDP (currently close to 4%) and a monetary deficit of no more than 1% of GDP. (this target has already been exceeded) and an increase of approximately six billion dollars in Central Bank reserves (currently usable reserves of 1.5 billion dollars).
“We will reach the 2.5% (primary) fiscal deficit target. We will do whatever it takes to deliver on our promise,” said Minister Massa.
The minister announced that in addition to the increase in tariffs, there would be no recruitment of new civil servants in order to meet the deficit target, but he did not announce any cuts in personnel. It also announced an audit of outreach schemes to identify fake beneficiaries.
Massa assured that the government would not finance itself with a Central Bank issuance until the end of the year to meet its monetary issuance target.
“We will no longer seek issuance to finance ourselves. We will make do with what we have and private financing,” he said.
In order to urgently increase the scarce reserves of the Central Bank, the government will create special conditions for investment in the oil and gas, mining and agriculture sectors. It will also provide a benefit to exporters in the agriculture, fisheries and mining sectors to forecast exports totaling US$ 5 billion in August. A further $2 billion will come from multilateral lenders.
insufficient measures
“This $5 billion, if we consider Argentina’s monthly exports of $7 billion, half of that comes from the agricultural sector. President of the Latin American Foundation for Economic Research (FIEL).
“It is very difficult to close the 2.5 percent deficit because we are already in August. There are only four months left for the minister to do this magic. It is an expression of desire that the government no longer finances itself with monetary issuance because the deficit is not reduced to 2.5% as the market predicts, the government will have to export to finance the difference with a larger deficit”, thinks economist Andrés Borenstein.
Sergio Massa took office earlier this Wednesday night (3) at Casa Rosada, the seat of the Argentine government. Two hours later, the Ministry of Economy announced measures that have set strong expectations since last Thursday, when Massa was confirmed as “super minister” to replace Silvina Batakis, who had only 24 days in office after replacing Martín Guzmán. .
“I read that I am a savior, a silver bullet, or a super minister. I am not a magician or a savior. I came to work”, diminutive Sergio Massa
According to political analysts, the arrival of Sergio Massa in government shifts the balance of power, leaving President Alberto Fernández as merely a figure of protocol for bureaucratic matters such as the signing of resolutions by the Minister of Economy.
source: Noticias
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