There will be more increases in electricity and gas rates: when are they projected

There will be more increases in electricity and gas rates: when are they projected
There will be more increases in electricity and gas rates: when are they projected

The Government promised the International Monetary Fund (IMF) that there will be further increases in energy (electricity and gas) and public transport (buses and trains) and water rates in the remainder of the year.

It will be due to the Government’s “need” to continue lowering public spending on subsidies to achieve the primary fiscal surplus and financial balance in public accounts, so as not to finance itself with more debt or monetary issue, which generates inflation.

“On the energy front, after the increases in electricity and natural gas rates, the authorities plan to achieve full cost recovery during the second half of the year and replace the segmentation scheme with one that subsidizes a basic consumption basket of vulnerable households. New increases in wholesale energy prices that are passed on to users and stricter limits on subsidizable demand are expected,” the Fund’s technicians revealed. And they added later in the document: “The next adjustments are expected after August.”

These actions can ensure a reduction in energy subsidies to 0.7% of Gross Domestic Product (GDP) in 2024, from 1.6 percentage points last year. It is equivalent to a fiscal saving of more than 5,000 million dollars, which is above the forecasts of private consultancies such as Economía & Energía and PxQ, which calculate a reduction in subsidies for electricity, natural gas and Liquefied Petroleum Gas. (LPG, bottles) of US$ 3,000 million.

Meanwhile, the Staff of the Monetary Fund reported, “the decrease in urban transportation subsidies (0.1% of GDP) will continue with the help of additional increases in bus and train fares in the Buenos Aires Metropolitan Area (AMBA). )”.

Although the technicians set this increase in May, in the order of 50%, that did not happen either last month or in June, since it would have added more than 1 percentage point to inflation, according to estimates by the consulting firm EcoGo. .

“Transfers from the Treasury to the state company Agua y Saneamientos Argentinos (AySA) are also being reduced”, with a monthly indexation formula that is maintained – unlike those for electricity and gas, which were suspended and will be reformulated. In fact, in June there was another 2.77% increase in drinking water and sewer rates.

However, the IMF and the Argentine authorities revised downwards the projection of total direct subsidies: from the 2.1% of the GDP that they represented in 2023, they would fall to 1.1% this year, while in the January estimate it was going to be 1.3%.

The difference represents about US$ 1.1 billion and is sustained by lower transfers to the energy sector due to the evolution of rates, supply costs (availability of cheap hydroelectric energy due to rains and lower import prices) and the adjustment in payments to electric generators and gas producers.

In the coming years, the plan is to continue lowering spending on subsidies through more rate increases that accompany inflation and the completion of infrastructure works such as gas pipelines to reduce the costs of imports and replace them with locally produced natural gas, publishes Clarín newspaper.

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