(Recasts with focus on financing costs; adds quote from
Dujovne, comment, background on Argentina's economy and bond
By Eliana Raszewski and Luc Cohen
BUENOS AIRES Feb 22 Argentina will aim to lower
its fiscal deficit by one percentage point per year in 2018 and
2019, Treasury Minister Nicolas Dujovne said on Wednesday, in a
move the government hopes will reduce financing costs.
The government expects the deficit to fall from 4.2 percent
this year to 3.2 percent in 2018 and 2.2 percent in 2019, he
said in a news conference, promising to contain spending in
Center-right President Mauricio Macri has implemented a
number of market-friendly reforms since taking office in
December 2015, including taking the country out of default to
return to global credit markets and cutting subsidies after
years of free-spending populism left a gaping budget deficit.
"It's a considerable effort, one point per year, which
leaves us in 2019 nearly stabilizing the growth of the ratio of
debt to output," Dujovne told journalists.
He said the deficit goals factored in economic growth of 3.5
percent in 2018 and 2019, the same level the government expects
in 2017. Dujovne said the central bank would be able to comply
with its target for inflation at or below 17 percent in 2017.
Dujovne also presented quarterly deficit goals, including
0.6 percent in the first quarter of this year, 2 percent in the
second quarter and 3.2 percent in the third quarter.
"What we're looking for through these fiscal policy aims is
to reduce the cost of capital," Dujovne said.
Last month, Argentina sold $7 billion in five-year and
10-year U.S. dollar bonds at interest rates of 5.625 percent and
7 percent, respectively.
Hernan Hirsch, chief economist at local consultancy FyE
Consult, said publishing quarterly fiscal results could reduce
Still, he termed the 2018 fiscal target "demanding," in part
because the government could no longer count on extra revenue
from fines from its successful tax amnesty program, which ends
in March. The program, which began last year, allows Argentines
to pay a fine to declare previously hidden assets.
"Given their growth scenario it is possible, but I see it as
optimistic," Hirsch said.
Dujovne said he planned to present a tax reform proposal to
Macri this year, which he hopes Congress will approve in 2018.
He said the reform would have a "neutral" effect on public
accounts, given growth expectations and plans to continue
Macri has removed export taxes on corn and wheat and lowered
them for soy, helping Argentina's key agricultural sector but
reducing public revenue. The government has cut subsidies for
home-heating natural gas and electricity, among other services,
raising consumer prices but lowering public spending.
(Writing by Caroline Stauffer and Luc Cohen; Editing by Chizu
Nomiyama and Lisa Von Ahn)