October 3, 2018 / 9:01 PM / 8 months ago

Argentina's austere 2019 budget faces congressional pushback

BUENOS AIRES, Oct 3 (Reuters) - Opposition Peronist lawmakers in Argentina’s lower house of Congress pushed back against President Mauricio Macri’s 2019 budget on Wednesday, questioning his fiscal targets and spending cuts as the country tries to climb out of another recession.

Lacking a majority in either congressional chamber, lawmakers say Macri’s center-right Cambiemos party may need to re-negotiate its austere budget proposal, which relies on increased taxes and cuts to government and social spending to balance the fiscal deficit next year and reduce its financing needs.

Macri’s budget was drafted weeks before the government finalized a revised standby financing deal with the International Monetary Fund. The new agreement upped the country’s credit line to $57 billion from $50 billion to curb investor fears about the country’s ability to service its international debts in 2019.

“The ‘zero deficit’ is a lie,” said Representative Graciela Camaño, head of center-left Peronist party’s Frente Renovador, who added that Cambiemos should revise the budget and bring another proposal to the table.

Peronism, long a dominant force in Argentine politics, includes followers of former leftist President Cristina Fernandez and other members of the movement inspired by populist General Juan Peron in the 1940s.

Representative Jose Luis Gioja, affiliated with the traditional Peronist Judicialist Party, called the budget plan “outdated,” questioning government estimates of the peso’s exchange rate next year.

Macri’s 2019 budget is based on a peso valued at an average of 40.1 per U.S. dollar in 2019. As part of the revised IMF program, the central bank announced last week it would allow the exchange rate to float freely between 34 and 44 pesos per dollar without intervention.

The currency has lost around 50 percent of its value against the dollar this year.

Macri’s chief of staff Marcos Peña dismissed the criticism, calling on senators to ratify the budget, saying it “has the right values and moves the country toward fiscal balance.”

With investors demanding the government stand by its budget-cutting program, some economists have warned that bitter fiscal medicine called for by the IMF might prove worse than the recession and high inflation that are already ailing Argentina. (Reporting by Gabriel Burin, writing by Scott Squires; Editing by Tom Brown)

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