Pending reforms, subsidies and social plans continue to drive the rise in spending



A gas service bill
A gas service bill

The Government plans to announce in the next 48 hours two key reforms that have been at the center of public debate for months and, also, at the heart of the imbalances in the Argentine economy in general and in public accounts in particular. On the one hand, if there is no further delay, today the details of the extensive application of tariff segmentation would be known. For tomorrow, meanwhile, is on the agenda of the Minister of Economy, Serge Massa, present a decree that gives legal form to the plan to transform social plans into formal work.

Both reforms aim to provide a solution, at least partially, to the most urgent problem that Massa has at the moment: the increase in public spending, both above the level of resources and due to the advance of inflation. And it is that energy subsidies and the growth of social plans are the main drivers of the rise in spending. Thus, These are two essential variables when it comes to adjusting the pegs to reduce the fiscal deficit.

Energy subsidies and the growth of social plans are the main drivers of the rise in spending

In this sense, subsidies for electricity and gas tariffs registered a year-on-year increase in real terms up to July – that is, above inflation – of 22.8%, while social programs recorded an almost equal increase of 22 .6%, always discounting inflation. In pesos, these figures imply $1.2 trillion in compensation for tariff arrears and $743,583 million for social programs, including the Empower Work plan, the Progress Scholarships and those destined for “food policies.” This item does not include social benefits with a mobility formula such as AUH and pensions, which to a much lesser extent, but with a higher incidence, also recorded a rise in spending of 5.4% against the first seven months of the year. last year. The three combined lines explain, according to the latest report from the Congressional Budget Office (OPC), the real rise of 8.3% in primary spending.

The increase in the level of State outlays contrasts with a drop in total income. Result: a fiscal deficit level 71% higher than the same period last year. “This dynamic occurred as a result of the 0.4% drop in real terms in total income and an increase of 7.7% in total expenses,” explained the OPC, which highlighted that, within the total, primary expenses grew at a higher rate. “Primary spending grew, driven mainly by energy subsidies, pensions and social programs,” they said.

Sergio Massa working with his team from the Ministry of Economy, last Friday
Sergio Massa working with his team from the Ministry of Economy, last Friday

The OPC report reveals another fact that sheds light on the urgency with which the Government addresses the issue of social plans. From the list of State expenditures, social programs are the ones with the highest level of execution. In other words, they are the ones that have consumed the most resources of the total amount assigned to them for the year.

Thus, for example, the Work Empowerment plan practically exhausted, five months before the end of the year, the established budget. Of the $279,000 million assigned, the social program has spent $233,000 million, that is, 83% of its “current credit”. Something similar occurs with the “Food Policies” plans, which have already consumed 67% of the total updated amount. That of social programs thus becomes the line that is most advanced in its level of execution, which, in simple terms, implies that if they maintain the pace of spending, the resources that were assigned will not be enough to reach the end of year. That is, they will require a budget increase.

On the income side, tax collection accumulated a rise of 3.6% until July, much more moderate than spending, thanks to income from VAT, Profits, Personal Assets and the Country Tax. On the other hand, revenue from withholdings fell 15%, due to negative weather factors, roadblocks and demonstrations that prevented entry to the ports. This was added to the non-existence of the Extraordinary Solidarity Contribution (the so-called tax on large fortunes), which determined a strong imbalance in the Treasury accounts.

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