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Saturday, March 25, 2023

The government ruled out reducing public spending

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The CFA had expressed its opinion through a report, on Wednesday, in which it maintained that “any fiscal impulse, regardless of its destination and magnitude, will have direct impacts on the structural fiscal position, if it is not offset by structural savings in the expense items”; warning about the risks of “possible reversal of the fiscal consideration process in structural terms”.

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Faced with this, the third party of the MEF pointed out that the tax cut “is already considered in the fiscal projections that the minister carried out days ago”, and which establish as an estimate that 2023 will close with an effective fiscal deficit of 2.6% of the Gross Domestic Product (GDP).

“This government, after three years of compliance with fiscal objectives that had been proposed, it seems to me that it has sufficient credibility for the tax reduction to be taken consistently and in line with what that fiscal rule is, ”said Bensión, along the same lines.

The MEF’s plans regarding the reduction of spending

As for the possibility of reducing public spending and thus offset the lower income that the treasury will have in personal income tax and IASS, as suggested by the CFA, the director of Economic Policy assured the opposite: “We are forecasting an increase in spending for 2023that increase was granted in the Accountability last year,” he said, and pointed out that the fiscal rule “does not imply a cut in spending as it is said slightly.”

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On the possibilities of reducing the fiscal deficit, in view of a tax cut and an increase in spending, the chief said that “the Uruguayan economy is growing, and the deficit is measured in relation to the Uruguayan economy; spending cannot be expanded by more than 2%, from what the economy grows”.

“This tax reduction was part of the government program that it assumes, we incorporated it into our plan and into our government program,” he stressed, and assured: “It seems very important to us that it is understood that this is perfectly compatible with the fiscal institutionality, with the care of Uruguayan money, and in fact represents an increase in real wages for Uruguayans”.

Source: Ambito

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