The welcome he received from the markets was not very auspicious because, despite the holiday in the USA -which limited the operations-, all the dollars experienced significant rises.
Also, the banking sector registered some withdrawals of deposits, although they attributed it to the uncertainty caused by the minister’s departure. Presumably, aware of the doubts generated by his appointment, his first message was: “I believe in fiscal balance and we are going to move in that direction” asserted Batakis.
“We look forward to working with Minister Silvina Batakis and her team to continue supporting Argentina and its people to strengthen macroeconomic stability and address its profound challenges to lay the foundations for more sustainable and inclusive growth”, was the protocol welcome made known by a spokesman for the International Monetary Fund. It remains to be seen whether the new minister will retain Sergio Chodos, who is the Argentine representative before the IMF, in her position.
The Minister of Economy commented that she agreed with President Alberto Fernández that “we are sure that the growth of Argentina has to do with the fiscal management of our accounts, with following the economic program that the president came marking and achieving more exports and revaluing our currency,” he said.
One of the aspects that generates many doubts in particular for investors is the issue of difficulties in accumulating reserves. In this sense, he pointed out that in order to maintain growth, it is necessary “to obtain more reserves and more exports, which implies not only strengthening the currency, but also creating more jobs throughout our country.”
To finally reiterate that it will be committed and, by presidential indication, to comply with three axes: achieve the solvency of the State, that they will continue with the economic program and I reiterate “I believe in fiscal balance and I believe that we have to move forward in that direction “, he explained.
Adjustment
Ensuring that it will continue with the agreement with the IMF raises some questions namely: raise the interest rate at the real level, the exchange rate that does not fall behind and adjust public spending.
In other words, for this, some policies such as universal income, which Vice President Cristina Fernández de Kirchner claimed, will demand income that the treasury does not count. Although there are no details about the universe of beneficiaries and the amount, it should be remembered that the IFE accounted for almost 2 points of GDP.
Meeting the fiscal balance will require that Batakis will have to contract the level of spending that expanded at a rate greater than 13% real to approximately 7.8%.
Given the rigidity of expenditures – today aggravated by energy needs – carrying out austerity policies demands unpleasant political decisions, such as, to cite just a few examples, not carrying out the purchase of computers for the Education area, cutting health spending (except for vaccines) or limit public works. In the background of the resignation is the fiscal problem.
Precisely days ago, a reserved report circulated in the Ministry of Economy in which it is stated that, with the current requirements of the policy, “the fiscal deficit cannot be financed.”
Debt
Until the end of last month, the intention of the economic team was to close -whatever- the goal agreed with the IMF.
This was achieved with spending by the Treasury somewhat higher than 800 billion pesos, but leaving some 150 billion unpaid, almost 20% of the expenditures demanded. An example, there are still no funds to pay the census takers since it implies about 4 billion pesos.
“Guzmán met the goal with the IMF but kicking payments and using creative accounting,” they commented with annoyance in La Rosada. In this regard, except for his team that regretted his departure, in the cabinet they did not regret his departure. The former minister was never interested in establishing a link with his peers in his cabinet.
Government data show that the fiscal goal for the second quarter was met, with an imbalance equivalent to 0.7% of GDP, but in the third quarter it will be necessary to cut the deficit to 0.3%, that is, a reduction to less than half.
This, moreover, in a context of growing demands. One of the most significant: while Guzmán planned to allocate 120 billion pesos to Energy in July, the head of this area, Darío Martínez, asks for 300 billion.
In this regard, knowing the resignation of Santiago Lopez Osornio, it is thought that Batakis will maintain the Energy team and presumably will implement the form that Federico Basualdo designed at the time.
Source: Ambito
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