Hours before the legal deadline, the Economy Ministry presented the 2024 budget bill, the road map in which the government establishes the main economic variables for this and the following year.

Although it was filed on Friday, nobody expects it to be treated until after October 22. In Argentina, it is not unusual for the budget bill treatment to happen after presidential elections. “It’s a tradition that in presidential election years the budget is debated after December 10, because that way it is guaranteed that the new members of the chambers can participate,” a legislative source said.

Year-on-year inflation for 2024 is forecast to be 70%, while average inflation will be around 90%. Nominal expenditure will grow by 93%, so the government hopes for a slight real increase in salaries and pensions after discounting inflation.

In the document, the government also reset the inflation forecast for 2023 to 135%, more than double the 60% it had originally predicted last year.

Per the new document, GDP is expected to drop by 2.5% this year and grow by 2.7% in 2024. According to the administration’s predictions, the official exchange rate will finish 2023 at AR$367 to the US dollar. The government aims to keep the current US$350 exchange rate until November 15, and then return to the crawling peg regime it abandoned when it devalued the peso by 22% on August 14.

According to the budget, the exchange rate by the end of 2024 will be AR$600 to the US dollar.

The government calculated that the recent relief measures for the August devaluation, which included bonuses for workers, price freezes, and tax breaks, had an impact on the fiscal performance for this year. 

The primary fiscal deficit goal for 2023 remained however at 1.9% of GDP, as the Economy Ministry calculated that the extra expenditure would be compensated by the new PAIS tax and the tariff spike. “Compensating measures will be necessary,” Ministry sources said.

The financial deficit, which also accounts for debt interest and services, is forecast to be 3.5% of the GDP in 2024.

Although the Economy Ministry released a communiqué the day before the primaries stating that the 2024 budget would have “zero deficit,” the primary deficit on the bill sent on Friday is 0.9% of the GDP — the percentage agreed upon with the International Monetary Fund (IMF)

However, the budget for 2024 has an addendum detailing tax breaks and preferential tax regimes that was also included in last year’s budget. According to the government, this provision accounts for 4.7% of the GDP. The list includes tax exceptions for judiciary members, owners of rural lands, and some companies. The government hopes that at least some of them will be repealed next year. 

“If the legislative branch allows it, we will have fiscal balance or even a surplus,” an official source told the Herald.

The lower fiscal deficit would be achieved by the new PAIS tax on imports and a growth in exports, given that the historic drought of 2023 has already ended. The government also hopes the recently signed FATCA agreement, which will allow it to obtain tax information on undeclared financial accounts in the US belonging to Argentine citizens, will also have a positive impact. Energy subsidies will also decrease and will be no higher than 1.4% of the GDP.

With increased international reserves, a lower deficit, and the resulting reduced need for monetary emission, the government hopes that inflation will decrease in 2024.

Government officials, however, are cautious about the budget’s forecasts since they know that the upcoming presidential elections can add volatility to the economy. Those elections, as candidate Javier Milei noted in a letter, will also condition the date the bill will be discussed in Congress.