February’s budget deficit jumped to $228 trillion and the fiscal target agreed with the IMF is complicated

The primary deficit in February tripled compared to the same month of the previous year, reaching $228,134 million up from $76.283 million in February 2023, as reported by the Department of Finance on Monday. Thus, during the first two months of the year, the accumulated red in the public accounts amounted to $432 trillion.

Thus, with the budget figures for the first two months, the Ministry of the Economy has practically consumed the entire ceiling of the primary deficit which is explicit in the agreement with the International Monetary Fund, forecast at 441,500 million dollars between January and March of this year, an objective that is not It was changed in the last revision of the objectives.

The quarterly cap expected until the end of March is $441 trillion. The annual film allows, depending on the programme, a primary deficit ceiling equivalent to 1.9% of GDP. But he also has quarterly authorities to respect.

In January, the jump in the year-on-year deficit had exceeded 1,000% and had reached $203 trillion. One of the factors that explain the budgetary difficulties with which the government started the year is also the drought. The reason lies in the fact that lower agricultural export settlements will also mean lower Treasury revenues through withholding taxes.

In this sense, for Equilibra “dryness also will affect budget accounts. We project a drop of $4.2 billion source deductions (due to lower regulations) and lower customs duties and DGA VAT (due to lower imports). The fall in GDP would also affect the collection of taxes linked to the activity”.

Meanwhile, the Office of the Congressional Budget (OPC) mentioned that in February the primary deficit – not counting interest payments on the debt, and which is the measure taken into consideration with the IMF – increased 177% compared to the same month of the previous year.

The increase in the deficit in February was explained, according to the OPC, by the fact that “total resources decreased by 7.2% in real terms and total expenditure decreased by 4.6%. Tax revenues fell by 14.3% on average, a decline that reached 56.4% in exit duties,” they mentioned.

For its part, LCG had estimated that “after the poor result in January, which consumed almost 50% of the target that the national government set for the first quarter, we expect that in February the primary deficit will show a red color around $145 trillionwhich would result in a cumulative primary deficit of 0.2% of GDP for the first two-month period of the year.

There is a tool that the executive power could have at hand, even if as it has already been widely used in recent months, it intends to leave it aside this time: the floating debtwhereby the state defers payments and obtains greater tax room.

Another variant, which they will seek to cover only to the limit, is to use the temporary advances of the Central Bank. There is, because it is also a constitutive goal of the program, a limit in this sense. It is 0.6% of GDP for the whole of 2023 and $140 trillion for the first trimester. So far this year, the Treasury has not requested funds from the BCRA in this way.

In the latest statement from the Monetary Fund services, there was a paragraph devoted specifically to the tax issue, the delay in the implementation of the subsidies and the new cost that the retirement moratorium recently passed by Congress.

“The authorities are committed to achieving the primary fiscal deficit of 1.9% of GDP in 2023 through continued spending controls, better targeting of energy subsidies and social assistance, and better prioritization of government spending. investment, while protecting priority social and infrastructure spending,” said the IMF introducing the topic.

“To achieve deficit reduction targets and enhance the progressivity of energy subsidies, the authorities plan to continue implementing andl agreed segmentation schemeeliminating subsidies for high-income residential users starting in May and for commercial users by the end of 2023,” staff said.

And finally, he underlined, concerning the moratorium. “Early and determined action will be taken to sustainably address the fiscal costs of the unexpected approval of the pension moratorium to secure fiscal targets for this year and beyond,” he continued.

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