As expected, the Senate passed the 2019 budget bill in the early hours of Thursday morning, thus approving the economic guidelines set by the government for the next year. To do so, Cambiemos’ representatives in the Upper House had the key support from a the so-called “Peronismo no Kirchnerista.”
The caucus led by Miguel Ángel Pichetto provided most of the remaining votes to reach the 37 necessary – one more than half of the 72 members – and effectively pass the bill, even though the senator indicated he was only doing it because it was “the lesser of two evils,” as “voting against the bill is an extremely bad sign for the international community.” “If we don’t vote for it, all actors of the Argentine economy will be brought down to their knees,” he added.
Even though the debat lasted roughly 15 hours, the session was relatively inconsequential, if we don’t take into account the inflammatory rhetoric that is always present in lawmakers’ speeches when a consequential bill is being discussed. Former President and current senator Cristina Fernández de Kirchner was present at the session and, predictably, was extremely critical of both the bill and the government in general.
“We are not discussing a budget bill today. These are actually spreadsheets designed to eliminate the fiscal deficit, and that hides an intention of paying international debt, following the guidelines of the International Monetary Fund.” “We are going down the worst path possible. You will leave a country that will be infinitely worse than the one you received,” Fernández de Kirchner said.
The former President was making reference to the fact that the bill plays a significant role in the government’s economic plan for 2019, as it establishes the guidelines aimed at abiding by the revised stand-by agreement reached with the International Monetary Fund (IMF) in September. Among them, to eliminate the primary fiscal deficit – that is, without taking into account sovereign debt interests – and not expand the monetary base until at least June of next year.
These austerity measures will entail reducing spending and increasing tax revenue by roughly AR $300 billion: the federal state will have to contribute with AR $200 billion, while the country’s 24 jurisdictions – 23 provinces and the City of Buenos Aires – will do so with the remaining AR $100 billion. In order to implement it, the government anticipated the exchange rate will be of AR $40.10 per US dollar, the GDP will contract by 0.5 percent of the GDP and the annual inflation will clock in by 23 percent.
In the 2018 budget bill, the government expected for the GDP to grow by 3.5 percent, for the exchange rate to be of AR $19.30 per US dollar and an annual inflation rate of 15.7 percent. The expected figures following the crisis are: -2.6 percent of the GDP, roughly AR $37 per US dollar, and for the inflation to be over 40 percent, respectively.
The bill will also send an auspicious signal to the Fund and the rest of the international community that the Macri administration seeks to strengthen ties with – and will be arriving to the country in two weeks for the for the G20 Leaders’ Summit – as it considers it to be illustrative of its political willingness to implement the necessary reforms to achieve sustainable growth.