The fiscal situation for the first quarter appears to be very compromised for the Government, based on objectives with the International Monetary Fund (IMF). The distance that in January it was supposed to be barely 0.4 points of GDP to achieve a 1.9% primary deficit, in reality it is at least 1.2 pointsboth due to the effect of drought and other technical issues.
One of the few spaces where the Government would have room to act are the rates, but politically it seems difficult. Much of the problem is caused by the drought because it will cause a drop in tax resources equivalent to half a point of GDP.
In the last Staff Report of the program with Argentina, the IMF insisted on the question of tariffs because there the Government had promised to reduce half a point of GDP in subsidies. Now that promise seems further away.
About, The Argentine Institute for Fiscal Analysis states that “if the IMF suggests that energy subsidies are the way to obtain resources to offset the losses in tax revenue caused by the drought, the reduction obviously must be greater”. “Given the assumption of a loss of tax revenue due to drought of 0.5 percentage points of GDP, if all the effort falls on the recipients of subsidies (if legally possible), the total reduction should be 1 percentage point” , says the entity. Strictly speaking, it is a technical exercise, because it is socially and politically unfeasible to make an adjustment of this magnitude only by raising rates.
Another thing to keep in mind is that the estimates for cutting the deficit in 2023 to reach 1.9% should not be made from the 2.3% declared last year, which would give an adjustment of just 0.4 points. The calculations should be done from 3.1%. That is because this year it will not be possible to calculate 0.3 points of property income (which were used in 2022), to which half a point must be added for the loss of tax income due to the drought. In other words, the distance for the annual goal in January was 1.2% of GDP. Now we must take into account that in the first two months the deficit was 0.25%, when it should have been 0.2%, for which reason the distance was widened to 1.25% of GDP. The correction that would have to be made for the remainder of the year is 0.14 points of GDP per month, estimated the IARAF.
While, According to the Expense Adjustment Monitor of the Analytica consultancy, in the third week of March, spending fell just 2.9% compared to the same period last year. Something that seems insufficient. The consultancy run by Ricardo Delgado shows in a series of One-year data that, although Sergio Massa started his administration by swerving in spending to curb an inflationary rampage, after calm was achieved, he began to raise it again. In seasonally adjusted terms, the level of February disbursements in constant currency was the same as that of July 2022, after having bottomed out in November. In that month the reduction in year-on-year terms had been almost 30% in real terms, while in February the cut was barely reduced to 4% in real terms.
With no chance of raising taxes due to the lack of parliamentary majorities, the Government has no room to maneuver to increase revenue, unless it resorts to the strategy of anticipating taxes for future periods, as AFIP will do from February 1 to treat to charge a 3% VAT perception on food to wholesalers.
Another option that remains for the Palacio de Hacienda is to make temporary use of the floating debt, even if it is not to close the quarterly objective. After having liquidated more than $300,000 million in January, and another $58,000 million in February, they would have about $445,000 million left to use in Marchon $731,000 million that remained in February, according to the Center for Political Economy (CEPA), directed by economist Hernán Letcher.
One element that already anticipates that March will have a meager result in fiscal matters is that the Central Bank began to assist the Treasury again with $130,000 million, to which must be added maturities with the entity for another $204,000 million, which in the current context, they will have been renewed.
Source: Ambito
