The Lower House in Congress approved the 2018 Budget yesterday and sent it on to the Senate with votes by Cambiemos (the Argentina Federal caucus) and the Renewal Front.
In a frenetic December that also included a pension and tax reform, the Lower House gave yesterday final approval to the fiscal pact between provincial governors and the Executive. The bills mark the end of the Lower House’s work for 2017, which will be in summer recess until March 1st when the Legislative year begins again.
165 lawmakers voted in favor of the 2018 Budget, 65 voted against it, and one of them abstained, ensuring that the Senate will begin handling the matter next week and give its approval before 2017 ends. The only abstention was from Lawmaker Sandro Castro of the Victory Front (FpV), whereas the rest of his caucus voted against the budget, along with the Socialists and the Left Front (FIT).
The budget estimates a Gross Domestic Product (GDP) growth of 3.5 percent, a shade higher than the 3 percent for 2017, as well as average inflation of 15.7 percent and an average exchange rate of 19.30 pesos to the US dollar. The fiscal deficit is also projected to fall from 4.5 to 3.2 percent, and interest on debt will increase by 28 percent compared to this year. Debt as a percentage of GDP is expected to climb from 28.5 percent to 31.1 percent. Lastly, social spending is expected to be up by 22.1 percent compared to 2017.
Lawmaker Luciano Laspina (PRO), opened the debate as chair of the Budget Committee, defending the budget on the grounds that it will help to reduce the government’s fiscal deficit and tackle infrastructure woes as well as social issues. He also noted that the predictions of growth for 2018 “mark the first time since 2011 that there will be growth for two consecutive years. This year it will be 3 percent and in 2018 it will be 3.5 percent, and the difference, compared to other periods, is that the increase is being lead by investment.” The budget predicts a 19 percent increase in government revenue and a 15 percent increase in spending.
Axel Kicillof, former Economy minister to ex president Cristina Fernández de Kirchner, criticized the budget for “more cutbacks, more debt and less public works.” He also called the predictions of the economic variables “false.” The Kirchnerite caucus has also pointed out that the budget was developed before the implementation of the tax and pension reforms and as a result, is not likely to be accurate.
Although the Renewal Front voted for the Budget, Graciela Camaño expressed concerns about the estimates for key variables in this year’s budget. “Last year they said that inflation would be in the range of 12 to 17 percent, but it will end up being somewhere around 23 percent to 27 percent. Growth was estimated at 3.5 percent and it’s going to end up being much less, perhaps 3 percent. When a budget underestimates inflation and overestimates growth, something’s up. There’s a hidden cutback.”
In the same session and with similar margins, the Lower House gave its approval to the fiscal pact and fiscal responsibility bills that the Executive has sealed with 23 of 24 provincial administrations. The fiscal pact bill sets out the terms of the redistribution of funds between the Executive and the provinces and commits funds to the provinces in exchange for the withdrawal of cases before the Supreme Court over money owed by the national governments. The fiscal responsibility bill sets out restrictions in real terms for the spending that the governors can undertake in the coming years.
The Renewal Front abstained from the vote on fiscal pact, resulting in 145 votes in favor, 53 negative and 20 abstentions. The fiscal responsibility bill saw the Renewal Front split, with the final tally resulting in a 159 votes in favor, 55 against, and three abstentions.