The Staff Report of the last review of the Fund modified the quantitative targets only based on the increase in inflation, which it estimates at 120% in order to maintain the proportion over GDP at 1.9%. But the calculation would fall short.
After the first semester, when the drop in fiscal resources due to the drought had a full impact, the International Monetary Fund (IMF) granted the Argentine Government to update the quantitative goals of the fiscal deficit based exclusively on inflation, that is to say, without making an adjustment above what was already being worked on up to now. That is, with nominally higher numbers, 1.9% of GDP is maintained.
The problem is that the Staff Report forecasts inflation of 120% in December, year-on-year, and that figure is what is in doubt. to july this year, according to estimates by the Argentine Political Economy Center (CEPA) the Accumulated deficit was $2.215 trillion and the goal should be $2.336 trillion at the end of the year. That is to say, a margin of only $121 billion remains.
“The increase in the goal for the end of September is only 8.9% and the goal for the end of December is 10.6%. These increases seem insufficient”, states the CEPA. The study center maintains that “in the same document, the fund suggests that in order to reach the fiscal deficit goal of 1.9% of GDP, it will be necessary to implement measures that generate more income to compensate for the losses in export duties due to the drought.” ”. Some of these measures have already been implemented and have shown the effect of collection growth. It is about the generalization of the PAIS Tax of 7.5% to most imports. With this, after a year it returned to real growth in tax collection.
According to estimates by the consulting firm Sarandí, the fiscal deficit in July reached 1.35% of GDP, so that for the rest of the year Sergio Massa would have a margin of 0.55%. The consultant points out that after the IMF review, consolidated spending corrected one point upwards, where the greater weight of social assistance (0.4 points), public salaries (0.3) and subsidies for public services (0.3). “The fiscal closing is given by the income pillar, with a higher expectation of tax collection (0.4 points of GDP), social security resources (0.3) and other non-tax income (0.3). “However, the first eight months of the year were not framed in fiscal terms,” says Sarandí.
Another element that is added to determine the fulfillment of the goals is the calculation of the GDP. According to what economists told Ámbito, at least until July, the Fund was working with one of $170 billion while the Government would be working with a smaller one. Some private make estimates with $174 billion.
As Letcher pointed outalthough the IMF refuses to admit that most of the problem of 2023 was the drought, rather than the blunders of the Government, “at best it could recognize inflation.” In other words, it could consider the goals met if the estimates of the new measures had fallen short.
By case, Sarandí, like other private consultants, estimate that inflation in 2023 will be 155%. Letcher, on the other hand, states that “it will not reach that level.” In addition to being difficult to anticipate the scenario that will take place in the next five months, the head of CEPA believes that the electoral context adds further uncertainty.
Source: Ambito
