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Contentious austerity budget passes Lower House

Calls to suspend Wednesday's vote on the 2019 Budget bill due to clashes between police and protesters failed to halt the bill's passage through the Lower House.

Thursday 25 October, 2018
Despite fierce opposition, the Macri government's 2019 Budget passed the Lower House.
Despite fierce opposition, the Macri government's 2019 Budget passed the Lower House. Foto:Noticias Argentinas

Calls to suspend Wednesday's vote on the 2019 Budget bill due to clashes between police and protesters failed to halt the bill's passage through the Lower House.

The 2019 budget proposal is the most contentious so far of the Mauricio Macri administration, given the austerity implications of the stand-by loan package the government signed with the International Monetary Fund (IMF) in June.

One of the 2019 Budget's key goals is to achieve "zero deficit" by 2019, from 2.6 percent of Gross Domestic Product in 2018. However, that aim only refers to the primary deficit and does not factor in interest payments, which have risen to nearly 50 percent.

The bill also contemplates a 0.5 percent drop in economic activity in 2019, from 2.4 percent for 2018. It calculates the exchange rate at an average US$ 40.10 in 2019; US$ 44.30 ini 2020; US$48.20 in 2021; and US$50.5 in 2022.

The sore point for Argentina's economy, inflation, is forecast at 23 percent in 2019. Meanwhile, the government has estimated a drop in consumer spending of 1.6 percent and a 9.7-percent decline in investment. 

Public debt will total 87 percent of GDP by the end of this year, according to the 2019 Budget, with the government set to need US$ 38.9 million in financing to cover its spending in 2019. 

SWEETENERS

On Tuesday, the coalition lawmakers in the Budget and Interior committee negotiated with a group of Peronist colleagues with close ties to provincial governors to implement a series of changes to the bill.

They include a package of tax measures to recalculate Personal Assets tax and Income tax based on a revised price index, and a special sole-trader tax mechanism for small sugar-cane and tobacco producers.

Another sweeteners was a compensation package of 6.5 billion pesos to counter the removal of urban public transport subsidies; the removal of an article which would have allowed the Executive to restructure public debt without Congress' approval; and a measure that would have blocked welfare recipients reaching the PUAM payment from working and making social security payments.

-TIMES

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