MercoPress. South Atlantic News Agency

Uruguay keeps consolidated budget deficit on target

In spite of a surge in expenditure in the last quarter Uruguay managed to keep to its fiscal target in 2007 with a budget deficit equivalent to 0.34% of GDP, below the 0.5% established in the Central Bank financial program.

Finance Deputy minister Mario Bergara said that the 2007 results were "as expected" and "we believe that our estimates for 2008 are consistent with less inflationary pressures compared to last year and in a world context which so far does not offer major obstacles for complying with the targets". Bergara said that in the last quarter of 2007, steps taken earlier in the year to contain inflation "begun to be felt", for example a subsidy to urban transport, which will extend until the end of 2008. Besides in the last quarter Uruguay replenished its oil and fuel reserves and had additional outlays in social security and capital investments. However when asked if the government will have the same fiscal margin in 2008 to contain prices, Bergara said "there's no reply to that yet". Last year the economy expanded more than expected and the government had "greater latitude" to address shocks caused by higher food and energy prices. Bergara said that inflationary pressures in 2008 are expected to be less than in 2007 and prices "may remain high but will not be as exposed as happened last year". Nevertheless the consolidated deficit of the Uruguayan government accounts in 2007 was one of the best in the last few years. In 2006 the deficit was equivalent to 0.5% of GDP; in 2005, 0.4%; in 2004, 1.8% and in 2003, 3.1%. The primary budget surplus which excludes debt interest payments registered in 2007 a 3.43% GDP surplus, just below the target of 3.5%. For this year the consolidated global deficit has been established at 0.4% of GDP while the primary surplus at 3.1%. Uruguayan government monopolies (energy, fuel, telecommunications, waterworks, ports, railways) also had a good performance in 2007, and since by law all surpluses must be handed to the Treasury there was a significant revenue help. With the exception of ANCAP the government owned oil company which lost 70 million US dollars to help keep fuel prices stable, all other corporations worked with a surplus, particularly the electricity company which sold 180 million US dollars of energy to neighboring Argentina and Brazil.