The international markets had a positive day yesterday, as Wall Street indices showed an increase following Monday’s dip caused by Jerome Powell’s statement about the US not cutting rates at the upcoming Federal Reserve’s Monetary Policy Committee meeting in March. However, Argentine assets and Merval took a hit.
As per the Ministry of Economy, there is a sense of skepticism regarding the outcome of the plan launched by Javier Milei’s Government on December 10, especially after the double setback in Congress. The skepticism arose first when Luis Caputo withdrew the fiscal package, and later when the Government lowered the Omnibus Law project. The officials believe that such skepticism is normal as investors and the market are waiting for tangible results after several failed experiences.
The Government has announced that the total fiscal result for January will be balanced, including the payment of interest on the debt. The Economy department asserts that this is the first time since 2012 that such a result has been achieved.
The question now, is whether this result is sustainable or not.
January typically sees a reduction in expenditure execution, which in turn reduces the deficit. Further, the liquidation of expenses on salaries and pensions is beneficial. Excluding the payment of interest on the debt, there has been a surplus in six of the past ten Januarys.
However, there are concerns about the sustainability of January’s fiscal balance as provincial treasuries are beginning to feel the strain. A governor allied to Milei stated that he hasn’t received any money since December, leading to questions about the longevity of such a situation.
In recent discussions, economists including former Minister of Economy Nicolás Dujovne and Fernando Morra, agreed that Caputo needs to provide a detailed outline of the 2024 fiscal program, explaining how fiscal balance will be achieved with legislative changes and in case of a deeper recession.
Sources from the Economy department stated yesterday that 75% of the effort will not rely on the law. To compensate, they plan to partially utilize the fuel tax. The remaining 25% will involve measures that are currently being analyzed, in addition to liquidation. According to the consulting firm Eco Go, 80% of the adjustment doesn’t need to go through Congress, potentially giving Caputo a slightly larger margin. The minister also hopes that the Government will resubmit the Earnings, withholdings and moratorium package to Congress.