Economy Minister Sergio Massa’s plan is to start applying the new energy, gas and water rates from September with cuts in subsidies for those households that, even though they have registered, exceed a certain consumption threshold.
According to official sources, as of Tuesday it will be known which families will be affected. According to the estimation of the Palacio de Hacienda, 80% of those who registered in the registry consume less than the required threshold, so they will maintain the subsidy. And the lower-income sectors that receive social plans are exempt from complying with this floor.
Until now, the only certainty regarding the cut-off floor is that in the case of electric power it will be 400 kW per month. The floor for gas and water has not yet been defined, since it will depend on the different regions of the country because the climate impact is different in each one.
The largest cuts in subsidies to electricity, water and gas rates will allow the government to save an amount equivalent to $500,000 million a year, a figure that is equivalent to less than one point of GDP, according to accounts from the Ministry of Economy.
Although they confirmed that the new rates will take effect from next month, the full impact of the cut will be felt in the 2023 budget that Sergio Massa, despite his recent arrival at the Palacio de Hacienda, is determined to send to Congress on September 15 , as provided by law. Thus, it seeks to correct the distortions that exist between the electricity rate by provinces, for example (see infographic).
That saving of $500,000 million will be a consequence not only of the cut in subsidies, but also of the savings that they expect to be produced in consumption once the rates are updated.
“The subsidy system had become a Hood Robin: subsidizing more to those who consume the most is contradictory. It is regressive, not progressive. Now we can do what we should have done before, ”the minister slipped before his team.
Massa knows that the times to come will be hard on the pocket “We are going to try to make wages equal to inflation this year,” they slipped into the minister’s team. As Massa said on Wednesday, in the government they point out that both the inflation data for July and August are going to be bad.
In the Palacio de Hacienda they are already opening the umbrella before the inflation data for July that will be known next Thursday. “It’s going to be a shock to the government.”
To palliate it, they are working on a bonus for retirees that will be announced next week, when the next salary adjustment is announced, which will take effect in September.
The cut in subsidies is in line with the new minister’s intention to comply with the agreement with the IMF, which foresees a decrease in spending that will allow closing the year with a deficit of 2.5% of GDP. Sources from the Ministry of Economy admit that today the consolidated deficit is out of date by 0.7%. “That is the percentage of what must be accommodated,” they remark. For now they do not give details that other games will be cut. “We are focused on savings.”
Yesterday afternoon from the Ministry of Economy they did not confirm or deny the resignation of the Secretary of Energy, Darío Martínez, who was circulating as a version on the networks. As it became known, the intention of the new team was to delay the announcement about whether Martínez leaves or stays until at least Tuesday. That day the Argentina Oil & Gas Patagonia 2022 Exhibition starts and the original intention was for Martínez to participate. The other strong position that remains undefined is that of deputy minister. Economy sources assure that Massa will confirm it this Friday.
Unfolding, for now, there will be no
In the Ministry of Economy they are not thinking of advancing with differentiated exchange rates. “We are not going to discuss the exchange rate now. We have to concentrate on reserves, everything is very limited”, they slide. For now there will be no progress in a split exchange rate for exporters, but in incentives. Along these lines, the Central Bank yesterday approved the issuance of a Letter in Dollars, aimed at stimulating the entry of external funds for pre-financing large exporters.
The currencies deposited through this mechanism will be deposited in the local financial system in a foreign currency account, enabling the financial entity to bid for the equivalent of that deposit, a Letter in Dollars. The interest rate will be fixed in a tender as a spread on the SOFER rate. The Central also enabled access to dollar-linked sight accounts for exporters who anticipate the settlement in more than thirty days with respect to the term determined for each sector.
Yesterday Massa had a meeting with the Monetary Fund and it was agreed to finish the review of the goals for the second quarter. From the Palacio de Hacienda they do not want to detail yet whether or not a waiver for non-compliance will have to be requested. “We are not going to mark the field for the Fund through the newspapers.” Energy imports became a leak where the dollars go. In Economy they say that for this month the outlook is better than expected: of the US$ 1,980 million of imports that were planned for August, the last month of strong cold, now it would be US$ 1,250 million.