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Deficit: the Government adjusted spending by 40% in January and will need $1 billion of surplus in March to comply with the IMF - infobae
Source:
www.infobae.com
February 06, 2024
Budget allocations for public works fell 70% in the first month of the year and transfers to provinces fell 60 percent. What is the “sequence” of the adjustment that the Executive Branch agreed to with the Monetary Fund?
By Mariano Boettner
01/28/2024 The Argentine Minister of Economy, Luis Caputo POLITICS SOUTH AMERICA ARGENTINA JULIÁN ÁLVAREZ - TÉLAM Europa Press
The Government began to move into the year in which it will seek zero deficit with a spending adjustment of almost 40% in the first month of the year, with a marked brake on budget items such as public works , which fell 70% in comparison with the same month last year. The path to fiscal balance will require the Ministry of Economy, as agreed with the IMF, to have a primary surplus in the first three months of 2024 of almost 1 trillion pesos .
The numbers compiled by the consulting firm Analytica and to which Infobae had access show a pronounced slowdown in public spending in January, according to the fiscal monitor carried out every month by that consulting firm. One of the central guidelines of the economic plan of the Javier Milei government is to promote an immediate and large fiscal adjustment to grant the public sector a financial balance - that is, a primary surplus to cover debt interest - greater than the 5 points of GDP .
According to Analytica data based on official information, the pruning in real terms in the first month of the year was 37% , higher than what December had marked, when it had been 31 percent. For primary spending in particular expressed in pesos at a constant value, if in January 2023 the national public sector spent 4.5 trillion pesos , last month it did so for 2.8 trillion , which would imply that adjustment of 37 percent .
Analyzed by sectors, the consulting firm measured that the most marked cut - at least in percentage terms, not in the magnitude of amounts - was in public works , with a 70.5% drop in real terms and went from about $100,000 million to a smaller sum, but without completely stopping the transfer of funds to that area.
Public works projects are one of the sectors in which Luis Caputo will seek to concentrate the adjustment of spending to cement the path towards zero deficit. According to its original roadmap, the cut in these items would be equivalent to 0.7% of GDP , although in light of the withdrawal of the fiscal chapter of the Omnibus Law and the tax increases that this entailed, the pruning could be even greater.
January fiscal adjustment, according to Analytica estimates
Next in this ranking of cut items were transfers to provinces , with almost a 60% drop. Other reports had already reported on this phenomenon: according to the Argentine Institute of Fiscal Analysis (Iaraf), discretionary transfers to governors fell by more than 60% in accrued terms and 98% on a cash basis , that is, what was actually paid.
That is a differentiation that is important to make: the Analytica report takes into consideration accrued spending , that is, the payment orders or promises that the public sector may have issued throughout January. This does not imply that the funds have been effectively paid , which implies that the cash-based result - the one reported by the Ministry of Finance and taken into consideration by the Monetary Fund - may show an even greater adjustment.
According to the Anayltica monitor, in December, the first month of the Libertarian government's administration, real spending accrued without seasonality had decreased by 31% compared to November, and 33.8% in interannual terms. In that month, primary spending was 50% lower compared to the first month of Mauricio Macri 's administration and 22% lower than that of Alberto Fernández , always in real terms.
The Government will need to meet, on that path that would end at the end of the year with a primary surplus of 2% of GDP and financial balance, three quarterly intermediate objectives that were set out in the renewed agreement with the International Monetary Fund.
The sequence of the fiscal adjustment would imply, for the Government, that at the end of the first quarter at the end of March the public sector should already have a surplus of almost 1 trillion pesos . By mid-year it should be almost 2 trillion pesos and in September, the last month reached by the IMF's technical reviews, the surplus should exceed 2.8 trillion pesos.
Source:
Déficit: el Gobierno ajustó 40% el gasto en enero y necesitará $1 billón de superávit en marzo para cumplir con el FMI
Las partidas presupuestarias en obra pública cayeron 70% en el primer mes del año y las transferencias a provincias, un 60 por ciento. Cómo es la “secuencia” del ajuste que acordó el Poder Ejecutivo con el Fondo Monetario
www.infobae.com
February 06, 2024
Budget allocations for public works fell 70% in the first month of the year and transfers to provinces fell 60 percent. What is the “sequence” of the adjustment that the Executive Branch agreed to with the Monetary Fund?
By Mariano Boettner
01/28/2024 The Argentine Minister of Economy, Luis Caputo POLITICS SOUTH AMERICA ARGENTINA JULIÁN ÁLVAREZ - TÉLAM Europa Press
The Government began to move into the year in which it will seek zero deficit with a spending adjustment of almost 40% in the first month of the year, with a marked brake on budget items such as public works , which fell 70% in comparison with the same month last year. The path to fiscal balance will require the Ministry of Economy, as agreed with the IMF, to have a primary surplus in the first three months of 2024 of almost 1 trillion pesos .
The numbers compiled by the consulting firm Analytica and to which Infobae had access show a pronounced slowdown in public spending in January, according to the fiscal monitor carried out every month by that consulting firm. One of the central guidelines of the economic plan of the Javier Milei government is to promote an immediate and large fiscal adjustment to grant the public sector a financial balance - that is, a primary surplus to cover debt interest - greater than the 5 points of GDP .
According to Analytica data based on official information, the pruning in real terms in the first month of the year was 37% , higher than what December had marked, when it had been 31 percent. For primary spending in particular expressed in pesos at a constant value, if in January 2023 the national public sector spent 4.5 trillion pesos , last month it did so for 2.8 trillion , which would imply that adjustment of 37 percent .
Analyzed by sectors, the consulting firm measured that the most marked cut - at least in percentage terms, not in the magnitude of amounts - was in public works , with a 70.5% drop in real terms and went from about $100,000 million to a smaller sum, but without completely stopping the transfer of funds to that area.
Public works projects are one of the sectors in which Luis Caputo will seek to concentrate the adjustment of spending to cement the path towards zero deficit. According to its original roadmap, the cut in these items would be equivalent to 0.7% of GDP , although in light of the withdrawal of the fiscal chapter of the Omnibus Law and the tax increases that this entailed, the pruning could be even greater.
January fiscal adjustment, according to Analytica estimates
Next in this ranking of cut items were transfers to provinces , with almost a 60% drop. Other reports had already reported on this phenomenon: according to the Argentine Institute of Fiscal Analysis (Iaraf), discretionary transfers to governors fell by more than 60% in accrued terms and 98% on a cash basis , that is, what was actually paid.
That is a differentiation that is important to make: the Analytica report takes into consideration accrued spending , that is, the payment orders or promises that the public sector may have issued throughout January. This does not imply that the funds have been effectively paid , which implies that the cash-based result - the one reported by the Ministry of Finance and taken into consideration by the Monetary Fund - may show an even greater adjustment.
Continuing with the ranking of fiscal pruning, Goods and Services fell 50.2% compared to January 2024, with a much larger amount Retirements, pensions and PAMI ( -43.2% , from 2.6 trillion to 1.5 billions of pesos) and social programs almost 41 percent . Subsidies, with very minor figures, increased by 163% between January 2023 and January 2024.
According to the Anayltica monitor, in December, the first month of the Libertarian government's administration, real spending accrued without seasonality had decreased by 31% compared to November, and 33.8% in interannual terms. In that month, primary spending was 50% lower compared to the first month of Mauricio Macri 's administration and 22% lower than that of Alberto Fernández , always in real terms.
The Government will need to meet, on that path that would end at the end of the year with a primary surplus of 2% of GDP and financial balance, three quarterly intermediate objectives that were set out in the renewed agreement with the International Monetary Fund.
The sequence of the fiscal adjustment would imply, for the Government, that at the end of the first quarter at the end of March the public sector should already have a surplus of almost 1 trillion pesos . By mid-year it should be almost 2 trillion pesos and in September, the last month reached by the IMF's technical reviews, the surplus should exceed 2.8 trillion pesos.
