The government of Javier Milei is heading to close thefiscal year with a result that for many seemed unlikely to be carried out. Until November, it would have already made an adjustment to the accounts of the National Public Sector equivalent to at least 3.7% of GDP, assuming that the accumulated financial surplus for the month has remained around half a point.
At this point in the year, already close to closing, The final positive result is assured, and only the final December number remains, which will only be known in mid-January 2025. Since the accumulated primary surplus of the first 11 months was 1.8% of GDP, for the result to go down to zero there would have to be two months with an equivalent deficit, which clearly has not happened.
To maintain andAt the current pace of adjustment, the year will close on December 31, having made a fiscal adjustment equivalent to 5 points of GDP, taking into account that in December 2023 the accumulated loss had been 4.43% of GDP. That is, the government managed to reverse last year’s red and to be more convincing with the market, it added at least half a point of fiscal surplus.
For this he applied “chainsaw” on retirements, capital spending and discretionary transfers to the provinces. In the case of retirees, throughout the year an expense cut of around 30% was applied. Regarding the second item, it stopped investing in infrastructure works, something that if not corrected will begin to be noticed in a greater deterioration of routes, roads, ports, and energy. And on the other hand, it cut discretionary funds to the provinces by 70%.
As one might suppose, Making an adjustment equivalent to 5 points of GDP in one year was not possible by touching only “political spending.” “This time the adjustment will be paid by the caste,” the phrase most used in the campaign by President Javier Milei, has a minimally true component.
The great weight of the program fell on retirees. Only in December would pension spending stop falling and even rise a little in real terms. It is because the greatest weight of spending in the Budget is on retirements and other social benefits. It was impossible to make the adjustment without affecting the beneficiaries.
What the libertarians usually call “political spending” it is not in itself what is related to the financing of parties but rather public works. Since they assume that there is some irregularity in every investment that the state undertakes, they decided to eliminate it.
Regarding discretionary transfers, throughout the year the Government managed to accumulate more than half a point of GDP in the fund that is intended to finance the Contributions from the National Treasury (ATN) although I only used $49.8 billion of that throughout the year. About $600,000 million remained in cash.
Nor should we underestimate that since the middle of the year The Secretary of Finance, Pablo Quirno, began using Capitalizable Letters (LECAP) to collaborate with the Central Bank in the task of removing excess pesos from the market.
The other way is Liquidity Tax Letters (LEFI) that although they are placed by the highest monetary authority, they are paid by the Treasury. Both accounting instruments do not generate interest, but at the end of their life they increase the debt. Some economists consider that Without it, the financial surplus would not be possible, but others, like the consulting firm 1816, say that yesIf the interest accrued on these bonds is adjusted for inflation, a financial surplus would still be possible, although on a smaller scale.
An approximation to the November accounts
The National Public Administration (APN) closed November with a primary surplus of $1.14 trillion and a financial deficit of $44.802 millionaccording to data from the Argentine Association of Budget and Public Financial Administration (ASAP).
The figures are the result of total income of $8.88 billion and primary expenses of $7.74 billion, that due to the payment of interest of $1.18 billion, they added up to a total expense of $8.9 billion.
The report corresponds to the accrued instance of the APN has methodological differences with those used by the Government, which is cash based for the total of the National Public Sectorl. The APN does not include some decentralized State organizations, companies and trust funds.
Last month’s performance, like that of all months of 2024, showed an improvement compared to the results of November 2023, when there were both primary ($206,824 million) and financial ($754,642 million) deficits.
Source: Ambito
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