why the fiscal deficit soared in May

The financial result was influenced not only by the sharp drop in collection, but also by the payment of interest on public debt

The Ministry of Economy disclosed this Monday the fiscal result corresponding to May 2020, which registered a primary deficit of $ 251,287 million.

When adding to that amount the interest payment of the public debt for $ 56,932 million, the financial result of the National Public Sector (SPN) closed the month with deficit of $ 308,219 million.

This panorama of numbers in red was the one that generated alarm in the Government and that motivated him to try a moderation in expenses: for example, the reduction of disbursements for the ATP program and payment of the Christmas bonus in quotas to the state.

The official report stated that “in the period under analysis, the total income of the SPN totaled $ 328,120 million – with a year-on-year variation of 2.4% – and explained that this behavior of resources was due to” the contractive effects of Preventive Social Isolation and Mandatory (ASPO) on the volumes of production, consumption, investment and foreign trade “.

In May, tax revenue decreased 3.3% compared to the same month of 2019, due to a 36.2% drop in export duties; -7.9% in VAT collection – net of refunds – and -5.1% in the tax on debits and credits.

Quarantine and the blow to the economy

This behavior of the resources was explained by the contracting effects of ASPO on the volumes of production, consumption, investment and foreign trade.

Regarding capital resources, the jump of $ 8,263 million, with respect to May 2019, corresponds mainly to transfers to Anses for the financing of the Historical Reparations program (article 121 of the 2019 Budget Law No. 27,467)

In SPN expenditures, primary spending amounted to $ 579,507 million – with a year-on-year growth of 96.8% – due essentially “to the measures implemented by the National Executive Power to sustain family income, sustain employment and production, and offset the drop in revenue from provincial administrations, “said the Ministry of Economy.

“Consequently, the boost in primary spending is explained almost entirely by current transfers, social security benefits and public capital investment,” the official report stressed.

Impact of state aid programs

Regarding current transfers, 75% corresponded to Anses bonus Family Emergency Income (IFE) and the Emergency Assistance to Work and Production (ATP) program, which in total totaled almost $ 80,000 million.

Along the same lines, the Alimentar program registered a year-on-year increase of $ 8,545.6 million and the allocations in the area of ​​Employment Support increased approximately $ 2 billion.

Expenditures for assistance programs had a strong impact.

In the context of the health emergency, expenditures from the Superintendency of Health and PAMI for almost $ 12 billion were also financed in May.

On the other hand, transfers to provinces reached $ 53,327 million, explained by Contributions from the National Treasury (ATN) for almost $ 11,000 million, food reinforcements to canteens and toilets to provincial hospitals for almost $ 4,500 million, and expenditures of $ 3,800 million destined to reinforce boxes. provincial pension funds not transferred to SIPA, among other items.

Social security benefits totaled $ 193,767 million, thus marking an interannual growth of 43.4% as a result of the provisions of Decree No. 163/2020.

Lastly, capital spending registered an increase of nearly 30% year-on-year, explained by capital transfers.

The collection, with another fall in June

The tax collection This month would once again show a historical decline: this is a glimpse of what happened during the first fortnight of June with the co-participation tax with the provinces. That data has become a good approximation to tax collection at the national level.

The partnership fell by no less than 21.5% in the first fortnight of the month, according to data collected by the consultant Economy & Regions.

“The partnership presented an increase of + 11.8% compared to the same fortnight in June 2019, totaling $ 57,044 million, with ten business days of collection and thus presenting a real drop of -21.5%, if one takes into account an estimated year-on-year inflation of + 42.4% “, they published the E&R economists.

For the last business days of the month, the consultancy projects a slight improvement in sending funds to the provinces, which would end the month with a drop -in real terms- of 16.4 percent.

It should be remembered that in May, the fall of tax collection it was 22.4%.

This setback, which would be setting the pattern for the fate of tax collection at the national level, certainly calls into question the official forecast of an incipient recovery of activity in the interior districts.

According to official reports, there are 15 provinces that operate above 80% after the lifting of restrictions due to the pandemic.

Tax collection falls and Guzmán turns on the alarms

Tax collection falls and Guzmán turns on the alarms

However, and always taking into account the advancement of E&R, this almost total removal of restrictions in various provinces would not be translated into an improvement in economic activity. Speculation indicates that, even without so many restrictions, consumer pockets were affected by the fall in wages (in real values) and also by the more conservative behavior of the public.

From this point of view of deterioration in tax numbers, and with a hole in the public accounts widening, it is understandable the government’s concern to put limits on that deficit.

Government measures to contain spending

Specifically, in the last few hours some measures that speak of a state measure in terms of public spending.

It has already been announced that there will be a payment in several installments of the bonuses of state wages above $ 80,000 gross.

Claudio Moroni, in charge of taking the news to the guilds, along with Martín Guzmán.

Claudio Moroni, in charge of taking the news to the guilds, along with Martín Guzmán.

It also emerged that there would be a cut in the State assistance through ATP (Supplementary Wages), a program that helped 193,000 companies this month to pay no less than 2,040,000 wages.

The idea is to restrict that plan to the districts that maintain the quarantine, such as the City of Buenos Aires, the Buenos Aires suburbs and the province of Chaco. But eliminate it in those places where the activity is normalizing.

Something similar could happen with the IFE (Emergency Family Income), They are charged by some nine million people with no insured income.

These topics will be part of the agenda of the economic team meeting that will take place this Wednesday at the Pink House, under the command of the Chief of Cabinet, Santiago Cafiero.

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