Public sector cash flow and the IMF Article IV Report update
In 2024, the public sector faces a projected 3.9% decline in total revenues due to the absence of significant one-time occurrences from the previous year, while primary expenditures are expected to rise by 8.6%. This increase is primarily driven by growth in current expenditure, particularly payroll expenses for public employees. Efforts to manage expenses are underway, although uncertainty surrounds the SEBD cash deficit of the CSS for this year and 2025. These items make the task of meeting the fiscal rule very difficult to fulfill. Potential short-term solutions, such as negotiating credible payment agreements with suppliers, could reduce the financing gap. Despite these challenges, the IMF recognizes the importance of maintaining fiscal sustainability, emphasizing the need for improved tax collection efficiency and a broader tax base. Efforts to reduce a 5.7% NFPS deficit (our estimate) to 4% of GDP (the IMF recommendation) are feasible, but the 1.5% per year deficit from 2025 on are unlikely to occur in the absence of profound fiscal reforms that the new administration (with scarce political capital) needs to address. In the banking sector, strengthening liquidity positions and capital buffers are also vital.
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