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Argentina's social security agency says deficit to increase
May 16, 2017 / 11:46 PM / 7 months ago

Argentina's social security agency says deficit to increase

BUENOS AIRES (Reuters) - Argentina’s social security agency, responsible for 43 percent of the federal government’s budget, expects the program’s deficit this year to exceed the 0.4 percent of GDP in 2016, the executive director said in an interview on Tuesday.

A higher deficit from the agency could complicate President Mauricio Macri’s plans to cut Argentina’s overall budget deficit without getting rid of social benefits in a congressional election year.

“The deficit will be bigger because we are reaching the limit of pension coverage. We have coverage of about 98 percent (of the population),” said Emilio Basavilbaso, director of the agency known as Anses. “It is a clear sign that we did not come here to reduce social benefits.”

Macri, who took office in December 2015 promising to end free-spending populism, is trying to lower the fiscal deficit from 4.6 percent of gross domestic product in 2016 to 4.2 percent this year and 3.2 percent in 2018. He seeks a better credit rating and more investment to fuel economic growth.

Basavilbaso said Congress could start to discuss a pension reform by the end of the year. He offered few details but said privatizing the pension system was not an option.

“There are other countries that have a manageable deficit, such as we have now, but if we do nothing, it would be irresponsible for the future,” Basavilbaso said.

According to calculations from consulting firm Ecolatina, Anses’s pension fund increased its expenditures by 44 percent while its revenues grew by only 32 percent in 2016, when Argentina’s economy was emerging from recession.

Anses received some 135 billion pesos ($8.66 billion) from a tax amnesty that ended in March but by law can only use the funds to pay retirees and settle court cases with pensioners who claimed they were underpaid.

Anses’s investment fund totaled $55.23 billion in 2016, growing 13.5 percent from the previous year. Some opposition politicians have criticized the fund for buying government bonds.

“We are investing every peso in the fund, not spending,” Basavilbaso said. “That is why we had a profit five times greater than in the previous government.”

Writing by Caroline Stauffer; Editing by Cynthia Osterman

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