In today’s pesos it would be about $11.4 billion. Transfers to provinces and real direct investment, among others, would have to be eliminated. The market believes that, if fiscal balance is achieved, the Leliq problem could be resolved.
Financial operators are practically convinced that the fiscal adjustment of epic proportions is the only instrument at hand that the president-elect, Javier Milei, has to avoid a spiraling of inflation. They believe more than anything that it will be the strategy to dismantle Leliq’s stock that the Central Bank accumulates. A report from the Argentine Institute of Fiscal Analysis (IARAF) puts numbers on the spending cut primary that the next government will have to apply to achieve the surplus. Today’s money would be $11.75 billion, which in real terms represents a decrease 25% compared to this year.
The report of IARAF It takes into account expense projections for November and December 2023 based on the result of the National Public Sector for October, and the decrease in resources that will be caused by the reduction of Income Tax resources and the refund of VAT for 2024. Estimate that The primary deficit will close this year at 2.8% of GDP and the financial deficit at 4.9%.
From there, the magnitude of the bailout is calculated to balance the budget. For example, it details that the Total non-automatic transfers to provinces, which would be in Milei’s sights, add up to $2.7 billion, which represents 23% of the necessary adjustment and implies a reduction in real spending of 5.7%. If you join an elimination of total direct investment, the adjustment would be covering 48.3% and real primary spending would have a reduction of 12%. By incorporating an elimination of spending on energy subsidies, the adjustment would be covering 82.5% of the necessary resources and real primary spending would decrease by 20.5%.
To this could be added the deficit of public companies, an expense that Milei also proposes to remove. “The elimination of these four expenses is not enough to complete the reduction necessary to achieve fiscal balance”, he warns. The remaining 17.5% should come from other expenses (which includes transfers to public companies). In terms of GDP, the elimination of these four items, according to the IARAF, is equivalent to 15.9%. Interest represents 0.9% of GDP. To this, he warns that we must add the floating debt of 2023, which should be paid off, while in 2024 it would have to be reduced to a minimum.
The operators of the markets They are observing this aspect of the next government in very detail. They consider that it will be very difficult to carry out this adjustment. Esteban Domecq, director of the consulting firm Invecq, said in a talk organized by the brokerage company GMA Capital. “There is a decision to close the deficit in year one, beyond what is provided for in the agreement with the IMF, which foresees 0.9%. The magnitude with interest is 5 to 6 points of GDP. One point can be contributed by the recovery of withholdings,” he explained. The consultant indicated that ““From Excel it is easy to do it, from the street it is very difficult.” In that sense, he linked the tax cut with the possibility of closing the monetary front, more than anything, of resolving the equivalent of $23 billion in Leliq. Domecq pointed out that a ““virtuous solution” for the BCRA debts is “to have a fiscal surplus and pay off monetary liabilities.””. The economist pointed out that, “if they manage to make the adjustment, they have the possibility of canceling the liabilities by monetizing the economy.”
For his part, the Argentine economist from the TWC fund in New York, Mauro Roca, maintained that “The Leliq are not a problem with an appropriate monetary-exchange scheme.”
Source: Ambito
