Argentina crisis: The strategy to end the fiscal deficit

The measures also include a 50% cut in investments, demonstrating that the Macri government already has an urgent need to balance the State's accounts

Argentina crisis: The strategy to end the fiscal deficit

This week, Argentine President Mauricio Macri announced a package of measures to reduce the country's fiscal deficit, thus improving its economy that has been declining since the 1970s. In addition, last week, suffered a strong blow when the peso plummeted 21% against the US dollar causing the currency devaluation to be at 102% against the dollar so far this year. Below we show what these measures consist of.

Leer en español: Crisis en Argentina: La estrategia para acabar el déficit fiscal

Where to cut and where to save?

In the first place, Casa Rosada's goal is to achieve 50% savings by reducing its investments by 0.7 points of GDP. Likewise, subsidies will be cut to represent 0.5% of GDP. According to the newspaper La Nación "That will be achieved […] through the transfer of that expenditure to the provinces, which will take charge of the electric social tariff and the bonuses that weigh on the automotive transport."

Nicolás Dujovne, Argentine Finance Minister also announced that a 0.2% GDP reduction in government salaries and operating expenses are expected, which will be achieved through a 20% saving in goods and services as well as a freezing of income. from personnel to the public domain.

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Dujovne said that with these measures, Argentina would be able to recover the balance in the public accounts for 2019, thus generating a saving of USD 6,000 million. Likewise, in 2020, a surplus of 1% over GDP would be reached, thus saving 5,200 million USD.

Another of the announced measures to achieve this task is the application of withholdings on agriculture, industry and services and export (the latter will be subject to withholdings of between USD 3 and 4), a mechanism that will make it possible to reduce the gap between prices of goods in the external and internal market.

In addition, the minister said that "the activity figures are going to be reviewed, assuming that the recession is going to be more pronounced than we thought. We are going to reduce the expected growth for next year. The same for inflation goals. "

Serious cuts in the cabinet of the Macri government

On the other hand, another important measure announced by Macri was the restructuring of his cabinet. Which will be reduced by half, through the absorption of ten ministries by other portfolios as secretaries of the same.

The Ministries of Culture and Science and Technology would go to the Ministry of Education. The Ministry of Health would be absorbed that of Social Development, Energy for Transport, Labor and Tourism for Production, Agro-industry for Finance and Environment and Modernization would be assumed by the head of the cabinet. The departure of the vice-chiefs of the cabinet Mario Quintana and Gustavo Lopetegui is also expected. All this as measures of saving before the current crisis.

Likewise, according to the portal Subrayado, Buenos Aires requested the IMF a three-year loan of USD 50,000 million, of which it has already received USD15,000 million and expects to be advanced for the next two years.

LatinAmerican Post | Sofía Carreño

Translated from: 'Crisis en Argentina: La estrategia para acabar el déficit fiscal'

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