The Nation – The Argentinean parliament on Thursday approved the 2019 budget including drastic cuts to return to a balanced budget, a commitment made by the government to the IMF when it negotiated a loan of 56 billion dollars to revive the third economy of Latin America, mired in a serious recession.
The text, much criticized by the opposition left because it includes large budget cuts, was adopted Thursday by 45 senators, 24 voted against and one abstained.
This is a political success for the government of Argentine center-right president Mauricio Macri, whose coalition has no majority in parliament but has managed to reach an agreement with moderate opposition.
Senate President Federico Pinedo highlighted Argentina’s “positive signal” to markets and potential investors.
The country was shaken this year by two currency crises, in March-April and August-September, which caused the peso to lose 50% of its value against the dollar and inflame inflation.
Faced with this crisis, Buenos Aires sought help from the International Monetary Fund (IMF), an institution with which it had virtually ceased its relations since 2006, in exchange for austerity.
At first reading in October, MEPs approved the budget with a clear majority. That day, clashes erupted between the police and isolated protesters who took them to task.
On Wednesday, at the beginning of the session in the Senate, thousands of protesters protested in peace. “No to Macri’s 2019 budget, the IMF and the PJ,” they chanted in reference to the Justicialist Party, the third largest force in the Senate, which has joined the Cambiemos government coalition to adopt the text.
“This budget does not please me, it’s the budget of a country in distress, but it would be worse not to vote it.The IMF is monitoring (…) There is no other solution” said Miguel Angel Pichetto, leader of the PJ senators.
Sacrifice
“Putting order in the state accounts implies a sacrifice,” said Senator Esteban Bullrich, a former minister of Mr. Macri.
“The IMF and the government are counting on a recovery of the economy in the second quarter of 2019.” In the meantime, this policy will have a recessive effect, “says economist Hector Rubini University of El Salvador, Buenos Aires.
The left-wing Senator Fernando Pino Solanas believes that this plan of recovery “is not the solution for Argentina, it is necessary to turn the page and to be convinced that there is another way”.
The government has made the commitment it made to the IMF to reduce the fiscal deficit by cutting 10 billion from the 2018 budget. In the first nine months of 2018, the budget deficit is lower than expected, at 1.1% of GDP instead of 1.9%.
The deficit, which had peaked at 6% in 2015, had been reduced to 3.9% in 2017 and the target of 2.7% for 2018 should be improved to 2.6%, for a record inflation of around 45%.
On Tuesday, however, the rating agency Standard & Poor lowered Argentina’s debt rating from B + to B by one notch, pointing to “the erosion of the trajectory of growth, the dynamics of inflation and the debt trajectory “.
According to the IMF, the contraction of GDP is expected to reach 2.6% this year and the recession will continue in 2019, with a contraction of GDP of 1.6%. However, the Washington institution anticipates “a growth of 3.2% in the medium term through the implementation of reforms and the return of confidence.”
By AFP published November 15
