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Where the chainsaw cut: 43% of the reduction in spending in the first two months fell on retirees - Infobae
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Donde cortó la motosierra: el 43% de la reducción del gasto en el primer bimestre recayó sobre los jubilados
Con el objetivo de alcanzar el déficit cero, la variable de ajuste del gobierno en los dos primeros meses del año fueron los haberes jubilatorios. El gasto en jubilaciones y pensiones habría caído 32,6% real interanual
www.infobae.com
March 06, 2024
With the objective of reaching zero deficit, the government's adjustment variable in the first two months of the year was retirement benefits. Spending on retirement and pensions would have fallen 32.6% real year-on-year
A retiree with the minimum will end March with a loss of purchasing power of 43% compared to the same period in 2023. (Europa Press)
After the financial surplus in January, and with a year-on-year reduction of 36% in February, the real expenditure accrued by the National Administration would have decreased by 33% in the first two months of the year. Retirees bore 43% of the adjustment, as a consequence of the liquidation of their assets .
According to the Argentine Institute of Fiscal Analysis (IARAF) , accrued primary spending was $4,070,000 million in February. When discounting inflation, which is expected to be around 15%, spending would have fallen 36.4% in real terms compared to the same month last year. This variation would be greater than those registered in the last two months (23.2% in December and 30.1% in January).
It should be noted that the reduction in spending in the first two months of the year was combined with the lowest tax collection in 9 years.
In detail, in the accumulated of the first two months of the year, primary spending would have fallen by 33.6% year-on-year. The items with the greatest real interannual drop would have been: total transfers to provinces (-65%), Goods and services (-46%) and benefits from the National Institute of social services for retirees and pensioners (INSSJP), with -39.5% . The most important expense, retirement and pensions, would have fallen by a real 32.6% year-on-year, somewhat less than the real fall in average spending.
During the first two months, the total reduction in primary spending would have been $3,869,000 million in February 2024 currency. Once again, retirees and pensioners would have been the group most affected by this reduction, contributing 43% of the total , equivalent to $1,682,000 million. Total transfers to provinces would follow, contributing 6%, and salary expenditure with 5%. The remaining 46% of the adjustment would have been distributed among the other items.
Participation of each item in the reduction of primary spending in February. Source: IARAF
In January, contributory retirements and pensions had also been the cut that “helped” the most to reduce spending with 33% participation (-$885,074 million)
“This reflects that the liquefaction of pensions and salaries in the first two months explains half of the total reduction in primary spending carried out in the period. The validity of a mobility formula that corrects assets based on past inflation has caused a significant deterioration in the purchasing power of retirees in the first months of the year. In effect, a retiree with the minimum will end March with a loss of purchasing power of 43% compared to the same period in 2023 . The flip side of such a loss of purchasing power is a significant drop in real spending on retirements and, therefore, in total spending,” the IARAF said in its report.
In this sense, economist Jorge Colina assured that, assuming an inflation rate of 15%, which is what the government expects; The reduction in pensions will have been 28% compared to the value it had in December. “Even with the increase of 27.18% , the loss in March will be 18% compared to the last month of 2023,” he detailed.
This increase is calculated according to the current retirement mobility formula that contemplates quarterly adjustments based on 50% of ANSES income and the other 50% on the Salary Index.
“The National Congress should urgently try and sanction a new mobility rule, which not only corrects what was lost in the year, but also avoids a loss in the remainder of the year. The healthy objective of achieving fiscal balance must incorporate other potential sources of financing such as tax expenditure, that is, the tax exemptions and benefits that certain activities have. The discussion must be broad,” he added.
“The national government and the provincial governments must agree on the best set of instruments to achieve consolidated fiscal balance, guaranteeing that retirees who have contributed all their lives stop suffering such a high loss of purchasing power. The May Pact represents a significant opportunity,” he concluded.
