Surplus lowers without pension funds

If it hadn't been for transfer of private pension funds to the State, May's fiscal surplus would have fallen 2.4 per cent with respect to 2006. Far from what government has described as record.

According to MVAS Macroeconomía, May's primary result between revenues and expenditures (without including payment of debt interests) posts an ARG$92-million decrease with respect to the same month of 2006.

As it has been noticed for some months now, poor performance of May's fiscal surplus is linked to sharp spending rise (45.5 per cent annual). All this within a context where collection has kept on growing at double-digit annual rates (33 per cent).

One year ago, primary surplus touched ARG$3.9 billions by virtue of ARG$14.8-billion revenues and ARG$10.9-billion primary expenditures.

Transfer

Fiscal figures showed that primary surplus has climbed to ARG$5.35 billions. "However, this positive result is less favourable if we take into account extra income (ARG$1.54 billion) from transfer of funds from private pension portfolio to the State, which have been counted as current revenues," the consulting firm explains. So, saving, without extra fund transfer, falls to ARG$3.81 billions, ARG$92 millions less than a year ago.

Bonds and stocks

We should also take into account that most of those funds (already exceeding ARG$3 billions) are public papers, stocks, mutual funds and cash.

Analysts warn that, if this fiscal trend whereby spending rises higher than income continues, surplus will plummet one percentage point in terms of GDP.

In fact, it would hit more than 2.5 points of GDP by deducting the ARG$7 billions ANSES (Argentine Social Security Administrative Bureau) will receive from AFJP (Retirement and Pension Funds Administrative Bureau).

We should not forget that this transfer will generate greater pension obligations. So, these funds hide an implicit debt to be paid in the future.

Then, the fiscal scene will demand a marked curb of public spending growth, since figures of Social Security are like the Sword of Damocles hanging over public finances' health.

In that sense, it's worth mentioning the consequences of non-registered employment, which tends to stabilize at 30 per cent of salary earners. The consulting firm EGES has analysed the impact of illegal job rate on fiscal accounts and it has come to the conclusion that, during the following five years, out of ten individuals in condition to retire, four won't have contributions. "In other words, Argentine State will have to answer for 24 individuals every 100 new pensioners in the following five years," EGES estimates.

For its part, IDESA highlights that, due to pension moratorium, there are more than 1.2 million of extra pensioners, who, within five years time, will entail a public spending increase of ARG$10.3 billions. We should also mention that the cost of welfare plans touched ARG$3.8 billions annual in 2003, covering 2.2 millions of beneficiaries.

Economists from the bank BBVA Francés estimate that fiscal cost of pension moratorium would hit this year ARG$5.83 billions, though it would exceed ARG$8 billions in 2012, extending till 2022.