2011 draft budget bill: Gov't to tap reserves for debt payment

By Rubén Rabanal

The draft budget bill for 2011 presented yesterday by Economy Minister Amado Boudou to the Budget and Treasury Committee in Congress confirmed the opposition won't approve the official estimates.

The key goals in the 2011 Budget -foreseeing inflation of 8.9 percent and 4.3 percent economic growth- hamper any possibility of reaching a political agreement, especially considering the members of the opposition are not willing to accept the President Cristina Fernández de Kirchner's administration issues presidential decrees to allocate revenue resulting from tax collection.

In the light of the 2011 presidential elections and considering that the total expenditure for 2011 is estimated at ARG$372,911 billion, the official proposal presented by Economy Minister Amado Boudou is likely to remain unpassed. A political agreement between the government and the opposition is far from being real, since the latter holds majority at both the Lower and the Upper House of Congress. President Cristina Fernández de Kichner might veto it and keep running the country without a proper budget bill.

The official proposal included all the measures and modifications the Kirchnerite sector seeks to implement, such as tax reforms and official appointments in government agencies aimed at financing works.

Also, the draft budget bill for 2011 plans to earmark US$ 7.5 billion in Central Bank foreign currency reserves to meet public debt, and urges the Congress to create a Debt-Restructuring Fund for such purpose.

Only the above-mentioned goal will complicate the debate on the 2011 budget bill because the opposition is not willing to let the government use foreign reserves if the latter doesn't detail the specific payments to be done. One year ago, this very same debate remained unsolved after Congress passed Senator Carlos Verna's initiative to use Central Bank reserves to service public debt. The bill included an ARG$14 billion budgetary item entitling the Federal Treasury to perform short -term credit-related transactions. It also granted the Economy Minister the possibility to issue Treasury Bills worth ARG$ 6 billion to acquire liquid fuels or gas and import electric power, improve Aerolineas Argentinas-Austral's air fleet. The Planning Ministry is also entitled to carry out public credit-related transactions totalling US$7.59 billion in order to finance 'prior investments.'

The draft budget bill for 2011 apparently fails to include the yearly-extended delegated faculties granted to the Cabinet Chief aimed at introducing several changes in the budgetary credits and the funds allocated to the social security agencies. But the delegated faculties are actually 'hidden' in Articles No. 8,9 and 10, in a move to pave the way to additional modifications, which are also allowed in the item concerning the so-called 'superpowers' (Article No. 37 under the Financial Administration Act)

The draft budget bill for 2011 also earmarks nearly ARG$ 13.257 billion to federal universities, ARG$1.184 billion to the National Employment Plan (Ministry of Labour). It also plans to import 3.5 million cubic metres of natural gas to fulfill the 2011 demand.

Translated by Jimena Gibert