Monday, March 4, 2024

ECONOMY | 16-01-2021 08:26

Budget 2020: 60% used to pay pensions, social plans or subsidies

Six out of every 10 pesos in last year’s Budget went to paying for pensions, social plans or business subsidies. Both government and private calculations estimate last year’s primary deficit to be around 6.5% of GDP.

The charts of Argentina’s 2020 Budget include an infinity of items and numbers explaining what the State spends its funds on, which mostly come from tax revenue. 

They range from 3.189 billion pesos in travel expenses or 408 million pesos in cleaning materials, to 1.245 billion pesos in computer programmes or 60 million pesos for kitchen utensils. Nevertheless, such expenses end up being small change alongside transfers to the private sector – 59 percent of the 2020 Budget went to paying pensions, social assistance or business subsidies.

An analysis of the data is key to understanding the difficulties consecutive Argentine governments have faced in reducing the primary fiscal deficit (not including debt payments), which for 2020 is set to finalise above 6.5 percent of GDP. This is a record figure, which the government’s own studies admit are only surpassed by the years of the Rodrigazo (economic policies introduced in 1975 under President Isabel Perón). The latest revenue data (November) shows the Treasury’s coffers accumulating a primary deficit of almost two trillion pesos.

In total, by the end of December all state departments had got through 6.6 trillion pesos, of which 3.9 trillion were classified as transfers to the private sector, including mainly 2.3 trillion on pensions, 1.1 trillion on social aid and 377 billion destined to private companies. It is thus no coincidence that 46 percent of the 2020 Budget has been used by the ANSES social security administration, from whence come not only the traditional pension payments but also the IFE (Ingreso Familiar de Emergencia) and ATP (Asistencia de Emergencia al Trabajo y la Producción) income and wage supplements seeking to palliate the impact of the crisis deepened by the Covid-19 quarantine.

More complex

The numbers become more complex when adding transfers to the public sector, which represent 18 percent of the total Budget. These include, for example, 581 billion pesos allocated to public companies or trust funds (which end up paying for public works or even subsidising private companies). A further 393 billion pesos were transferred, beyond the requirements of the federal revenue-sharing law, to provincial and municipal governments. 

The fiscal accounts of the districts have been crushed by the pandemic and quarantine. As the economists explain, money is fungible, which is why those funds end up financing any type of spending by the provinces.

After “servicing the debt,” which absorbed 9.3 percent of the 2020 Budget, the heaviest item of expenditure is staff expenses, or more formally “expenditure on personnel” – this amounted to 569 billion pesos, which represents 8.6 percent of the total. Over and above the political and labour difficulties which any cuts on this point would bring about, there is one aspect showing this to be an inflexible item – 81 percent went on paying the salaries of permanent staff.

Other expenditure

The rest of the 2020 Budget (barely four percent) went on non-personal goods and services. The biggest item here is “technical and professional services” (16.8 billion pesos), followed by “maintenance, repairs and cleaning” (15.5 billion pesos) and “commercial and financial services” (10.6 billion pesos). Such basic services as electricity and water (9.4 billion pesos) or “publicity and propaganda,” i.e. advertising and promotion, (three billion pesos) are included.

Among the goods the outstanding items are “construction” (72.25 billion pesos) and “machinery and equipment” (13.6 billion pesos). The spending on “military and security equipment” was 2.6 billion pesos, less than on travel expenses or state advertising. Books and magazines also accounted for 89 million pesos.

Finally, the biggest spending on consumer goods was on “Chemicals, fuels and lubricants” (44 billion pesos) – 84 percent of that on pharmaceutical and medical products. A further 14.7 billion pesos went on “food, agricultural and forestry products” and 3.4 billion on “minor medical, surgical and laboratory instruments.” 

Finally, “textiles and clothing” (including uniforms) claimed 2.1 billion pesos and “office equipment” 2.8 billion pesos.

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Gabriel Ziblat

Gabriel Ziblat

Editor de Política - Diario Perfil.


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