Argentina's government suffered an embarrassing defeat on Friday as its 2022 Budget was rejected by Congress, underlining tensions over the country's economic policies at a time of tense debt renegotiations with the International Monetary Fund.
The ruling Frente de Todos coalition's proposed budget bill envisaged 2022 growth of four percent, compared to around 10 percent in 2021, and a relative controlling of inflation at 33 percent, well below this year's 50 percent. It had been widely criticised by opposition lawmakers previous to discussions in congressional committee meetings this week, but the government's attempts to introduce more than 40 last-minute changes exacerbated tensions even further.
It was finally defeated by 132 votes to 121, with one abstention, in the lower house Chamber of Deputies, where the governing alliance is in the minority.
The budget fiasco is the first example of the problems that face President Alberto Fernández during the final two years of his mandate following last month's midterm legislative elections defeat. Having already been in the minority in the Chamber of Deputies, the Peronist leader's Frente de Todos coalition also lost control of the Senate.
Economy Minister Martín Guzmán "proposes an idyllic scenario with growth and low inflation, ignoring the critical situation the country is going through with a fiscal deficit it cannot finance, inflation over 50 percent, an exchange rate gap of 100 percent and a fiscal deficit of three points of GDP," said opposition deputy Luciano Laspina (Juntos por el Cambio, Rosario), explaining the rejection.
The blow means Argentina will have to extend the 2021 Budget, though paradoxically that could afford it greater leeway in the allocation of resources since the Executive will not be constrained by voted budgetary allocations.
Nevertheless, the defeat sends a negative signal about a lack of macro-economic consensus among Argentina's political class, with the country locked in renegotiations with the International Monetary Fund over its US$44-billion debt.
At the beginning of the week, Guzmán said Argentina can "in no way amortise the repayments of around US$18 billion in 2022 and US$19 billion in 2023."
Already in recession since 2018, the coronavirus pandemic plunged Argentina into an even worse economic crisis. GDP slumped 9.9 percent in 2020, with officials forecasting growth of 10 percent this calendar year.
Running at more than 50 percent annually, the country suffers from one of the world's highest inflation rates and has a poverty rate of 42 percent for a population of 45 million.