By Ken Parks for DOW JONES NEWSWIRES BUENOS AIRES (Dow Jones)--Argentina President Cristina Fernandez on Wednesday instructed her government to operate under the 2010 budget next year with provisions to use $7.5 billion of the central bank's foreign currency reserves to pay public debt.
Fernandez was forced to roll over this year's budget after Congress didn't pass her 2011 budget proposal due in no small part to her refusal to negotiate any modifications to the original bill.
The country's fragmented opposition had demanded changes to what they said were unrealistic economic forecasts in the proposal that would have given the government ample funds for discretionary spending ahead of general elections next October. Some members of the opposition also opposed a measure in the bill that would have allowed the government to use $7.5 billion of reserves to service its debts.
In two decrees published Wednesday in the Federal Gazette, Fernandez rolled over the 2010 budget and ordered the Economy Ministry to issue the Central Bank of Argentina 10-year bonds in exchange for $7.5 billion to pay private creditors during 2011.
The 2010 budget authorized spending of 315.1 billion pesos ($79.1 billion) and estimated revenue from taxes and social security contributions of ARS403.5 billion. Growth in gross domestic product was pegged at 2.5%, though it will likely close the year at a whopping 9%.
The 2011 budget bill called for an 18.3% increase in spending to ARS372.9 billion, while revenue was expected to rise 22% to ARS492.2 billion. It also forecast GDP to rise 4.3% and annual inflation of 8.9%.
By falling back on this year's budget the Fernandez administration is assured of ample funding in 2011, thanks to the extremely low economic assumptions embedded in the budget that virtually guarantee windfall tax collection.
Federal tax revenue soared 34% on the year to ARS371.1 billion in the January-to-November period alone this year, exceeding the government's full-year target by nearly ARS52 billion.
So far, the president has distributed about ARS40 billion in excess revenue through emergency decrees in December and November, with the Labor and Planning Ministries benefiting the most.
Fernandez is widely expected to.. Read full article
