The Government of Macri will end up with an accumulated fiscal deficit of USD 112,300 and a debt of USD 92,240 million


He fiscal deficit it's a problem chronic and recurring of Argentina. At the end of the 2016-2019 period, the primary deficit – prior to paying interest on the debt – would reach USD 61.4 billion. But by adding interest expenses, the fiscal red would total USD 112.3 billion, according to an analysis carried out by the Argentine Institute of Fiscal Analysis (Iaraf). But it will be nothing out of the ordinary: of the last 59 years, 52 ended with a fiscal deficit.

“Each government claims to have the recipe for lowering inflation, one of the main symptoms of the fiscal deficit, but with a set of alchemy that lasts a certain time and that does not prevent the restrictions from ending up materializing. The underlying problem is that, year after year, crisis after crisis and regardless of the political color, the Argentine state spends more than it collects”, Explained the authors of the report Nadin Arganaraz, Ariel Barraud and Bruno Panighel.

The data of USD 112,300 million fiscal deficit arises from analyzing the behavior of the fiscal imbalance between 2016 and 2019, considering the projections of expenses of the Ministry of Finance for the 2019 budget closing. The expense and income accounts were expressed in current dollars: the monthly average values ​​in pesos were used and the average monthly wholesale exchange rate of the Central Bank (BCRA) was used.

During 2016, the total public expenditure of the National Non-Financial Public Sector (SPNNF) was USD 141,642 million. After making a peak of USD 158,235 million in 2017, it was reduced to reach USD 98,260 million in this year 2019. The first conclusion is that Total spending was reduced by about USD 43,000 million in the last three years.

In the last four years the expenditure The public totaled about USD 520,000 million, according to Iaraf data. “Primary expenses showed a reduction in the last four years. Only net interest on public debt showed an increase. This fact is a reflection of the policy of gradual reduction of the primary deficit in a public debt financing scheme. As time goes by, the debt stock gets bigger and the interest that the stock earns is getting bigger and bigger, ”warned Iaraf specialists.

On the side of the income SPNNF totals, in 2016 added up USD 109,881 million which includes the USD 7.116 million that came in for the laundering in that year. Extraordinary money laundering revenues are also included in the 2017 income, totaling USD 120,662 million.

During this year 2019, the total income would end up being of USD 80,000 million approximately. That is revenues of about USD 30,000 million were lost between 2016 and 2019. In the four years included in the analysis, SPNNF revenues totaled USD 407,000 million.

“Analyzing the differential dynamics of income between 2016 and 2019, a fall of these four years can be quantified would be approximately USD 29.9 billion. When analyzing the income by component, it follows that income from contributions and contributions to social security were the ones that had the greatest drop, for USD 12.4 billion. On the other hand, capital income and net property income were the ones that rose the most and, together with income related to foreign trade, partially offset the sharp drop in usual tax revenues such as Earnings, VAT and debit and credit tax ”, they detailed. In the last four years, expenses consistently exceeded revenues.

The link between the fiscal deficit and the debt.

How can public spending be financed? It can be done with taxes, with inflation tax via monetary issue or with indebtedness. In the latter case, when the fiscal red – difference between expenses and income – is financed with indebtedness, an equivalent increase in the public sector debt stock is generated.

“Debt must be done to cover the primary deficit and interest on the debt. The latter are partly a consequence of debt stock with which a management begins and, partly, of the fiscal deficit that continues being had. Given this, if in the first year of management debt is taken to finance the deficit, in the second year the accrued interest expense of the debt should reflect that increase in the first year's debt, ”they recalled.

To cover the deficit of the last four years – the USD 112.3 billion – a strategy of indebtedness in voluntary debt markets. Bonds and Treasury Bills were issued both in pesos and in foreign currency. Due, Foreign currency debt showed a growth of USD 92,240 million between the end of 2015 and June 30, 2019, the latest official data available.

The report notes that at the end of this year 2019 the stock of foreign currency debt will be higher than at the end of 2015, while the fiscal deficit remains high. “The restructuring of the debt can lead to a drop in the annual flow of interest, but requires the generation of a positive current value of primary surplus. The economy is in recession and everything indicates that it would continue in that situation in 2020. All fronts are complicated, ”they concluded from Iaraf. In addition, they considered that given the continuity of the fiscal deficit, society's discussion should not be how to finance the deficit but how to solve the problem.

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