The International Monetary Fund (IMF) estimates that the new economic measures will have a fiscal cost of at least 0.4% of GDPTherefore, “fiscal pressures will increase in the future.” However, he assures that the primary fiscal deficit target for 2023 must remain at 1.9% of GDPthrough greater cuts in subsidies, targeting of social plans and the pension moratorium and adjustments in public salaries.
This is how it follows from last Staff Report published by the IMF after the disbursement of US$7.5 billion, where the approval of the fifth and sixth review is found, together with the definition of the new goals for 2023.
In the first pages of the report, he reviews the “recent developments” of the Argentine economy. There, he establishes that the “fiscal deficit increased markedly” due to the drop in income from exports as a result of the drought, which was “partially” offset by spending cuts. The document ensures that the primary deficit accumulated to June increased to 1.1% of GDP, due to a 9% drop in income and a 6% drop in real public spending, “led by strong reductions in energy subsidies (15%), transfers to companies and provinces (25%), and pensions (9%).
“New tax and spending initiatives, worth around 0.4% of GDP, are expected to increase fiscal pressures in the future”anticipates the IMF in the document published on Friday, two days before the announcement of the package of measures. It would be equivalent to about $700,000 million, although the economy did not officially disclose the total fiscal cost. The Fund document anticipated that the measures would be related to tax relief for households and SMEs, “unique bonuses” for pensioners and students, and greater subsidies for credit card purchases.
However, the announcements are broader than the Fund anticipated. The Minister of Economy, Sergio Massa, anticipated that for 7.8 million retirees there will be a $37,000 bonus. For workers, the fixed sum of $60,000 will be assumed by the State through the payment of micro and small business contributions on account. For monotributistas, the State will stop collecting the tax component for categories A, B, C and D. For the most vulnerable families, there will be a reinforcement in the food card for 2.4 million beneficiaries and also an extra for the 1 .3 million from Potenciar Trabajo. In addition, there will be credits with subsidized rates.
However, the IMF anticipates that the fiscal goal of 1.9% of GDP must be met. Until June, the deviation from what was agreed was 0.3% of GDP, as a result of lower exports, but also “higher current expenses, even on the public salary front.” For this reason, in the section on fiscal policies, the IMF calls for a “stricter fiscal policy” for the second semester, which should imply a drop in public spending of 11% in real terms between August and December.
For it to be fulfilled, the IMF anticipates that the magnifying glass will go through five points: an improvement in income from the country tax on imports, which will contribute 0.8% of GDP, although it claims to end this tax at the beginning of 2024. The The second point is public salaries: he says that they have been growing at 7% year-on-year, and they should close the year +3%, so it should imply a “real decrease in the wage bill of 5% year-on-year between August and December”.
The third point is energy subsidies: the IMF anticipates that increases in electricity rates are coming, which should be effective by September 1, and which will also include small businesses and low- and medium-income families, while large businesses and high-income families will pay 100% of the cost of production. The fourth point refers to pensions: it says that 130,000 people entered the moratorium, of the estimated 800,000, I feel more than 75% of minimum assets. Finally, regarding social spending, he requests that the audits continue to “focus” the assistance of Potenciar Trabajo.
Source: Ambito
