The economist Gabriel Oddonedesignated as next economy ministerhas explained that the government of Wide Frontwho will take office shortly, will inherit a tight fiscal situation and a growing level of indebtedness. Oddone described this context in a press conference after Yamandu Orsithe president-elect, will reveal his cabinet.
Oddone commented that the current fiscal situation is comparable to that of 2019, which was already considered problematic. As he explained, the fiscal space is limited due to an increase in the public spending and a higher level of debt, elements that must be managed carefully to maintain the macroeconomic balance.
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Regarding the priorities of the Wide FrontOddone mentioned a particular interest in fostering economic growth through policies that consolidate macroeconomic stability. In addition, it seeks to improve the allocation of resourcesemphasizing investment in science, technology and strengthening of policies for childhood.
The economist stressed the need to obtain more information to turn their aspirations into concrete actions. Without this detailed knowledge, the incoming government faces uncertainties about which areas of spending can be prioritized.
At the same press conference, Oddone announced Guillermo Tolosa as the new president of the Central Bank. He estimated that for Christmasyour economic team will be fully formed, with 90% of the members already confirmed.
Increase in debt limit
In response to current economic adversities, the Ministry of Economy and Finance of Uruguay has decided to activate the safeguard clauseraising the net debt limit for 2024 to a maximum of US$2.99 billion. This measure follows similar episodes during the pandemic. covid-19 and periods of drought.
The original legal debt limit was US$2.3 billion, as established in the Accountability 2023. However, as of November of this year, the debt was already close to US$ 2,287 million, suggesting the possibility of exceeding the limit by December.
The use of the safeguard clause is justified by extraordinary events such as serious economic slowdowns and substantial changes in relative prices, situations that Uruguay currently faces. This allows debt to be increased by up to an additional 30%.
Impact of economic fluctuations
Among the reasons for activating this clause, the Ministry highlighted the significant changes in prices that affected tax collection, significantly reducing tax revenues. A reduction of close to US$600 million in collection was reported, also affected by a lower level of economic activityin addition to microeconomic factors that caused additional losses.
The variations in the indices of prices They also played a crucial role in this decision. The international prices of raw materials have fluctuated, impacting the local economy. Furthermore, a drop in international prices and a significant price distortion compared to Argentina have contributed to this situation.
This scenario has resulted in a reduction in the indices inflationary of the country, greater than previously estimated. While this has favored the economic growth and the purchasing power of households, has also implied a drop in tax revenue net by 2024.
Transparency in fiscal management
In accordance with the Budget Law, the authorities of the Ministry of Economy are required to submit a report to the General Assembly within 30 days of invoking the safeguard clause. This action seeks to ensure transparent management of additional fiscal resources.
