Saturday, June 22, 2024

ECONOMY | 22-04-2024 15:34

How Milei and Caputo achieved Argentina's twin surpluses

‘Chainsaw’ and ‘blender’ plans pay off for Milei in much-improved fiscal figures for first quarter, as Argentina his government reporting a primary surplus and positive trade balance.

President Javier Milei will announce Monday evening that Argentina has achieved a primary surplus in its public accounts during the first quarter, also registering a favourable trade balance over the same period.

Milei is to due to speak in a ‘Cadena Nacional’ national broadcast  at 9pm during which he will announce his fiscal achievement, according to government sources.

Some experts, however, are questioning the way in which the figures were achieved.

Economist Enrique Szewach asserts that the positive balance was the result of “sitting on top of the cashier,” not making payments due to “an emergency.” But he warned that it is time to make the necessary reforms to make Milei’s approach sustainable over time.

“There’s something in the Omnibus Law and the fiscal package which can help,” Szewach stated in a radio interview.

Economist Martín Redrado, who governed the Central Bank from 2004 to 2010, followed the same line, observing that the Government “has trampled on plenty of expenses.”

“That can’t be kept up for a very long time. One example are pensions: a pensioner who collects the minimum pension can’t even afford half the basic food basket,” noted Redrado.

These assertions are in keeping with a report by Analytica consultancy firm, which stated that expenditure in pensions was reduced by nearly 35 percent in March, a clearly unsustainable path. 

This cut in spending pensions is also a fact that has alerted the International Monetary Fund, despite the Milei government’s compliance with the targets outlined in Argentina’s US$44-billion loan deal.

On several occasions, IMF officials have pointed out that the government “must adjust the quality of the expenditure” and “protect the most vulnerable.”

Another tool used by Milei to reach fiscal surplus was the application of a tourniquet on Argentina’s provincial governments, achieved by the almost entire elimination of discretionary transfers. 

The government also put an end to public works projects – not even those backed with funding from multilateral bodies are being carried out. 

The postponement of payments, such as the two-trillion-peso debt of CAMMESA, the company regulating the electric system, has also swung the numbers.

The IMF is due to hold its next quarterly review of Argentina’s programme in May. Staff have already said that targets have been met and the multilateral lender is expected to disburse around US$790 million in funds. 

Government data shows that Argentina recorded a positive trade balance of US$2 billion in March, with US$4.253 billion registered in the first quarter of the year. In the same period last year, the figure was US$1.343 billion in the red. 

An improved cereals harvest has been key to the turnaround, recording a 27.4 percent rise in revenue in the quarter compared to the same period last year. A near seven percent drop in energy imports also contributed. 



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