In the last few days, two initiatives of the Kirchnerist hard wing were known to pour more money into the street.
One is the project Basic salary universal presented last Tuesday. The other, announced the previous week, a pension moratorium for people without years of contributions necessary to collect a retirement.
A calculation by the consulting firm Analytica estimated that the fiscal cost of both measures supposes an extra increase in spending of $2 trillion per year, equivalent to 2.66% of GDP.
To give an idea of what the amount means, there are two comparisons:
– is equivalent to the commitment of fiscal deficit signed by Minister Martín Guzmán with the IMF for this year,
– equals the amount the government spent on subsidies in almost two years.
– main three social programs which are the food card, the progress plan and the promotion of work, consume 0.66% of GDP per year.
Said in Creole: the Kirchnerist proposal not only goes against the agreement signed with the organization but also goes in the opposite direction of what Guzmán is looking for because would double the current fiscal imbalance.
None of the aforementioned proposals was consulted with the Ministry of Economy. Since they are not foreseen in the program with the IMF, hardly find support from the economic team.
In these days there were contacts between the Palacio de Hacienda and the staff of the Fund in view of the revision of the program and the disbursement of June.
Analytica’s work was done on the following basis of calculations: – The deputies’ proposal presented on Tuesday in the Delia Parodi Chamber of Deputies is equivalent to an extra public expenditure of 2.4% of GDP. It involves paying a figure equal to the basic food basket (about $15,500 in July) to 8,900,000 beneficiaries (those registered in IFE 1). From that number of beneficiaries, for every million extra people who receive the benefit, 0.26% of GDP is added to spending in one year.
– In the case of the pension moratorium, there are some 800,000 people eligible for retirement. Analytica calculated that there are about 300,000 to receive it this year. This would mean an extra 0.13% of GDP. The other 500,000 would add 0.2% more.
If you add each component of the exercise, at least for one year, you have that 2.4% + 0.13% would be equivalent to an impact of 2.53% of GDP. “This in silver is $2 billion, unfeasible for the Argentine economy”summarizes Ricardo Delgado, head of Analytica.
Kirchnerism encouraged and also proposed measures that would not have a fiscal impact. For example, the advancement of the minimum wage or parity. It is something else to protect income from inflation and not release extra resources.
Economy endorsed the idea. In his Twitter account on Friday, he highlighted as one of the “5 good news of the week” that the Government advance the increases in the minimum, vital and mobile salary.
There were other measures in that line.
“In the fiscal area, it was confirmed that the income boost for retirees, low-level monotributors and informal workers will reach 13.6 million people, including 6.1 million retirees, and will require $206 billion (0.3% of GDP) ”, indicates a document this Friday from the Delphos consultancy. Likewise, Sergio Massa activated steps to raise the Earnings floor to about $265,000 from the current $225,937 as of June and the increase in the minimum vital and mobile salary was brought forward with a rise of 17% in June and 5% in August.
To understand, Kirchnerism intensified the blows against the minister through two channels: the declarations and the pretense of further expanding public spending.
Andrés Larroque, minister in the government of Axel Kicillof, said that “No one voted for the minister”. Then Cristina Kirchner criticized inflation and said that it is not enough for workers to get out of poverty.
Finally, Kirchnerism also pressured the minister by setting the economic agenda from Congress. Not only with measures to protect workers from price increases, but also with bills to raise the level of public spending. Clearly blows against the fiscal consolidation and Guzmán.
“All these measures aim to improve the income of workers, retirees and beneficiaries of social plans, but they further complicate the achievement of the fiscal goal, which was already highly demanded by the increase in energy subsidies. It is not surprising then that the monetary issue to assist the Treasury was activated again, adding another $ 86,500 million, “says Delphos. “In total, 41% of the transfers allowed by the agreement with the IMF have already been consumed, some $705,200 million, a limit that will probably increase to $740,000 only due to the effect of the higher inflation”. According to this consultant, inflation at the end of the year could reach 75%.