last april the primary fiscal deficit, not including the invention of property income, soared 820%. Not even the runaway increase in public debt could cover such an imbalance in public finances and, therefore, the BCRA had to once again resort to issuing money to finance the Treasury.
But the relevant fact is that at some point, it was speculated, even by this writer, that the monetary issue to generate inflation was a strategy to dilute public spending. Although some items were losing relevance, throughout the new period of the third Kirchner government, a level of expenditures is observed that increases more than the acceleration rate registered by the general level of consumer prices that INDEC surveys, that is, it grew in terms of real.
The government did liquefy the item corresponding to the payment of retirement and pensions, which nominally rose 147 percent
In November 2019, the last full month of the Cambiemos government, primary spending totaled $375.3 billion and in April of this year it reached $1,164,767 million, an increase of 210%.. For its part, inflation, taking the CPI as a reference, was 162%. The rate of inflation grows, but much more total public spending. The government did liquefy the item corresponding to the payment of retirement and pensions, which rose nominally 147 percent.
The item that shot up notably was that corresponding to economic subsidies, to keep the rates of public services artificially low.
In November 2019, $37.4 billion were allocated to subsidize public service rates and in April of this year it reached $162.1 billion with an increase of 333%, well above the rate of inflation. And given that already in December 2021, when Russia’s invasion of Ukraine had not yet begun, that item had reached $160.6 billion this jump cannot be attributed to the effect of the armed conflict on the price of fuel and the cost of electricity. It had already started in mid-2021 to increase more sharply.
Correcting the backlog of public service rates without a solid, consistent economic plan and with a government that generates credibility is going to produce serious social problems.
The underlying problem is that correcting this problem of delay in public service rates without a solid, consistent economic plan and with a government that generates credibility is going to produce serious social problems. But don’t do it, too.
The first conclusion that can be drawn from the first 29 months of the government of the Frente de Todos is that far from increasing the rate of inflation to liquidate public spending, it boosted it and notably increased the fiscal deficit, thereby increasing the need for financing. through the indebtedness of the Treasury and the issuance of the Central Bank.
In the first graph it can be clearly seen how in 2020 the fiscal deficit increased due to the effect of the Covid-19 pandemic, but in particular due to the extensive quarantine that caused the level of activity to plummet and consequently the tax collection in the middle of the crisis. need to increase public social spending.
In 2020 the fiscal deficit increased due to the effect of the Covid-19 pandemic, but in particular due to the extensive quarantine
However, after the eternal quarantine, the pace of spending accelerated again from mid-2021, hand in hand with the “Platinum Plan” to reverse the adverse electoral result in the mid-term PASO.
Accelerating rate of price rise
The increase in the fiscal deficit and the phenomenal monetary expansion ended in the current cost of a record monthly inflation rate in the last 30 years, in a context of delay in the official real exchange rate, postponement of the adjustment of public utility rates and the disarming of the “time bomb” that represents the growing stock of Leliq and net repos of the BCRA, which exceeds the entire monetary base, remains pending.
In other words, the fiscal destruction that this government did has no limits and is what makes one doubt whether, as in the previous presidency of Cristina Fernández de Kirchner, he will be able to leave a “minefield” for his successor without being exploited firstbecause it intends to continue distributing more social plans and bonuses to planners, as if the treasury had ample resources.
Although the fiscal data for May is not yet available, it is to be assumed that they must have been worse than those of April, given that the monetary issue to finance the Treasury is substantially greater: $178.5 billion, equivalent to 47% of the total issued in what so far this year for that purpose.
In short, the Government pays the high cost of a higher rate of inflation, without achieving the supposed benefit of “liquefying” the total primary public spending, only partially some items.
Correcting the fiscal mess is going to be a titanic task for the next government, if it doesn’t blow up everything first, because, to tell the truth, the management of Alberto Fernández seems to take pains to try to step on the minefield that he sowed and that the so-called “black palate Kirchnerism” tries to expand it.