MercoPress. South Atlantic News Agency

Strong primary budget surplus

The Argentine government consolidated sector is forecasted to finish 2003 with a strong primary budget surplus equivalent to 2,8% of GDP, well above target according to the private risk agency Fundación Capital.

"The good revenue performance opens the possibility of ending 2003 with balanced government accounts", says Fundación Capital adding that "relations with the IMF will improve as the primary consolidated budget surplus increases".

At federal level government accounts are expected to be 965 million pesos short (approximately 340 million US dollars) meaning the Treasury will not need to request additional funds from the Central Bank. Similarly at consolidated provincial level, Fundación Capital estimates there should be no major problems since the target of a primary budget surplus equivalent to 0,4% of GDP is attainable, because of a significant revenue increase of over 3,5 billion US dollars in 2003. "This way the consolidated public sector could end 2003 with a primary surplus of 2,8% of GDP, well above the objective agreed with the IMF", said economist Carlos Pérez who presides over the risk agency.

However Mr. Pérez pointed out that "provinces will have to make an additional effort, following the federal government, so that the restructuring of the debt can move forward, plus avoiding the same mistakes of the early nineties when the public sector became the main growth engine of regional economies".

"Given the competitive edge given by the strong devaluation of the Argentine currency, which has begun to be felt with intensity in the provinces, regional governments must act with austerity". Fundación Capital nevertheless warns that once the restructuring of Argentina's foreign and local debt has been sorted out, "the public sector will have to face greater interest payments".

Besides, the federal government must begin saving for a contingency fund that should help absorb future contractions or disturbances of the Argentine economy underlined Mr. Pérez.