Argentina govt says budget defeat will 'affect' debt negotiation

Buenos Aires (AFP) – Argentina's government suffered an embarrassing defeat on Friday as its 2022 budget was rejected by parliament, with Economy Minister Martin Guzman insisting this would "affect" its debt renegotiations with the International Monetary Fund.


Guzman said the defeat "weakens us as a nation-state within Argentina and before the world. And that hurts us."

The defeat came just hours before President Alberto Fernandez held a virtual meeting with IMF chief Kristalina Georgieva.

"I spoke with the head of the IMF @KGeorgieva," said Fernandez on Twitter.

"We both recognized the unexpected problem of the budget rejection but promised to continue working fully focused on bringing about an agreement that does not compromise the continuity of the inclusive economic recovery."

The proposed budget envisaged 2022 growth of four percent, compared to around 10 percent in 2021, and a relative controlling of inflation at 33 percent, well below this year's 50 percent.

But it was defeated by 132 to votes to 121 in the lower house Chamber of Deputies, where the governing center-left alliance is in the minority.

It is the first example of the problems that face Fernandez during the final two years of his mandate following last month's midterm legislative elections defeat.

Having already been in the minority in the Chamber of Deputies, Fernandez's Frente de Todos (Everyone's Front) coalition also lost control of the upper house Senate.

Guzman said the rebuttal "signifies rejecting the macro-economic program that is the basis for the negotiations with the IMF to refinance the absurd and damaging $44 billion debt."

Fernandez's government has been attempting to renegotiate the terms of the IMF debt -- acquired under his liberal predecessor Mauricio Macri -- almost since the moment he took office.

At the beginning of the week, Guzman said Argentina can "in no way amortize the repayments of around $18 billion in 2022 and $19 billion in 2023."

Even so, Georgieva wrote on Twitter that she had a "very good meeting with President @alferdez (Fernandez) on advancing our work to sustain #Argentina's recovery and address its economic challenges."

Already in recession since 2018, the coronavirus pandemic plunged Argentina into an even worse economic crisis.

The country has one of the world's highest inflation rates and a poverty rate of 42 percent for a population of 45 million.

The opposition dismissed the proposed budget as a pipe dream.

"Guzman proposes an idyllic scenario with growth and low inflation, ignoring the critical situation the country is going through with a fiscal deficit it cannot finance, inflation over 50 percent, an exchange rate gap of 100 percent and a fiscal deficit of three points of GDP," said opposition lawmaker Luciano Laspina, explaining the rejection.

The blow means Argentina will have to extend the 2021 budget, but paradoxically that could afford it greater leeway in the allocation of resources since the executive will not be constrained by voted budgetary allocations.