The new year starts with adjustments in public spending. Without the extraordinary income that he received throughout 2021 -among them, what was collected by the wealth tax-, the government of Alberto Fernandez was forced to have strong cuts in different budget items, even the most sensitive ones such as social spending.
The magnitude of the adjustment totals almost $225 billion According to the latest report from the Congressional Budget Office (CBO). This report analyzes the Administrative Decision 4 dictated by the Executive Branch last week, by which it distributed the resources and credits corresponding to the 2021 budget extension, following Congress rejected last December the budget project sent by the Executive Power for this year.
In that administrative decision, the Ministry of Economy admitted that in 2022 total revenue will fall by just over $627 billion. This is due, first of all, to the fact that he will no longer have the extraordinary income he received last year, including Special Drawing Rights (SDR) for $422,174 million that Argentina received according to its participation quota in the International Monetary Fund (IMF). Said amount was eliminated from current transfers from international organizations, as well as from financial applications.
In addition, the ministry led by Martín Guzmán also eliminated other income from the income category. $204,640 million from the so-called “extraordinary and solidarity contribution” -known as the wealth tax-, an emergency tax that promoted Kirchnerism in Congress for the only time due to the pandemic. Said contribution was made by those taxpayers with assets greater than $200 million.
According to the latest data from the Ministry of Economy, as of the last month of last year, said tax had collected $247,503 million. As this extraordinary contribution has already expired, the items that were nourished by this tax were seriously cut: the Secretary of Energy, for example, will have a loss of $60,190 million, while the Ministries of Health, Education and Labor, Employment and Social Security will lose $48,150 million respectively.
However, the cuts will cover other areas as well. The Ministry of Social Development, a key area that manages millionaire items to attend to the social emergency, will have a pruning of $4,847 million. Meanwhile, the item “Obligations in charge of the Treasury”, from where transfers to provinces and public sector companies are made, will have a decrease of just over $3,000 million.
In Administrative Decision 4, the Government also eliminated from the appropriations assigned to the Ministry of Interior expenses corresponding to the primary and general elections that were held last year. This sum totals $19,532 million.
The only portfolio that avoided the adjustment and, on the contrary, received an increase in its item is the Ministry of Environment and Sustainable Development, led by Juan Cabandié: this year he will receive an extra $4,847 million, with which the game will total $16,771 million.
Thus, with the budget readjustment for this year, the estimate of income starts with a total of $7.9 trillion (-627,025 million compared to December 31, 2021), while primary expenses -that is, without considering the payment of interest on the debt- would total $10 billion (-$224,889 million). Ergo, The primary fiscal red would deepen in 2022, which would increase to just over $2 trillion (+$402,136 million compared to the end of fiscal year 2021).
These numbers do not necessarily imply that this spending cut policy will be maintained throughout the current year. Quite the contrary, the opposition hopes that, as it did in the previous two years, the Government readjusts the different items through decrees of necessity and urgency as revenue increases due to inflation.
For example, throughout the past year, especially during the last quarter, the Government gave free rein to spending as a result of the electoral campaign and increased budget items by 2.6 trillion pesos -31%- compared to the initial credits. Much of this rise is explained by the strong expansion of capital spending (mainly public works) and economic subsidies (especially energy) which, until last November, increased by 21% and 29% in terms real respectively.
Despite this strong increase in spending, Minister Guzmán managed to improve the primary fiscal deficit, which last year stood at around 3% of GDP. This was thanks to the extraordinary income received by the Treasury (the SDRs from the IMF and the wealth tax), which this year will not be computed. Too it is likely that the treasury collects less by way of withholdings to the field; Although this item was key in the increase in collection last year due to the record soybean harvest, the drought might play a trick on the Government this year: according to the Rosario Stock Exchange, the National State will stop collecting export duties for US$ 1,038 million due to the fall in agricultural production.
as well as an increase in withholdings due to the record soybean harvest. However, the collection for withholdings