The sharp decline in the 2021 deficit has rounded the numbers somewhat, but fiscal tensions persist

In a sort of reference to Washington, this finding creeps into the government’s negotiations with International Monetary Fund Approval of a new program to refinance the $45 billion debt borne by Mauricio Macri.

The path to reducing fiscal deficits today is at the center of discussions. The CEO has proposed a gradual reduction until the initial balance is reached in 2027, while calling for the fund to move forward faster. In the words of Guzmán, it will be the difference between the growth plan and the adjustment plan that stifles revitalization even before the pre-crisis levels that began in 2018.

But the new rule from which to start the multi-year plan’s financial targets under negotiation (3% of GDP or less from 2021) brings the numbers a bit closer and leads the Treasury Palace to revise its proposed 2022 guidelines downward. The budget bill that faltered in Congress, Guzmán posted a 3.3% deficit, which is a slight decrease of twenty compared to the previous estimate last year.

Although they avoid detailing the numbers that Argentine negotiators exchange with fund technicians on a daily basis, official sources confirm that the idea they are working on is “a downward trajectory year after year, at a sustainable rate.” This year, that would represent a few tenths less than 3% of GDP. They say “the issue is speed and that doesn’t mean adjusting”.

However, tensions remain. The Fund insists on reducing public works items to speed up the reduction of the deficit. The International Monetary Fund has indicated that there must be more rapid fiscal consolidation. But there are two problems: The first is that the way they are presented will halt the economic recovery in the short term. The second is that the point at which faster fiscal consolidation will focus will be on a smaller expansion of investment in public infrastructure. For us, this is very important because this investment is what Argentina needs most from a productive point of view “, Guzmán said yesterday in an interview with Agence France-Presse. “We are a little bit better than we were a week ago, but there is an important way to go,” he added.

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But like any discussion with the Fund, it is a political negotiation with the great powers. For this reason, there were expectations in the economy of the outcome of the meeting between Secretary of State Santiago Cafiero and Anthony Blinken, his counterpart from the United States, the specific country within the body headed by Kristalina Georgieva and the only one with a veto of a majority. private decisions.

As reported by the Argentine Foreign Ministry, Cafiero yesterday in Washington asked Blinken to mediate with the Treasury (led by Janet Yellen) “to obtain the support of the United States. In the fund, in this way growth is not constrained. From. Argentina “. The Treasury has a tougher stance than the White House, they believe in Lusada. “Blinken confirmed that he strongly supports negotiations with the International Monetary Fund and aspires to a quick positive solution,” Palacio San Martin confirmed.

The truth is that even with a path like the one proposed by the government, analysts find it difficult to reduce the deficit in 2022 that does not include spending adjustments. In a country experiencing a severe social crisis and in the midst of a faster-than-expected recovery in activity, last year’s 3% reflected three simultaneous conditions: extraordinary income (due to the contribution of large fortunes and prosperity to commodity prices), the impact of 10% growth in tax collection and also Discipline when it comes to spending, which has included a real cut in provisions for retirement and the scrapping of the bulk of the Covid 2020 package.

Without a second issue of the Solidarity Contribution and with a drought threatening to affect income through cuts, the starting point for this year looks more complicated. In the government, they are betting that the continued economic recovery will enhance the collection of taxes associated with the activity, in addition to reducing energy subsidies through the unfreezing and fragmentation of customs duties.

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Aileen Morales

"Beer nerd. Food fanatic. Alcohol scholar. Tv practitioner. Writer. Troublemaker. Falls down a lot."

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