The government is proposing additional loans of S/5,447 billion, in which projects will they be invested? | Economy

The full Congress voted in favor Alternative text of Bill 5997, which authorizes additional appropriations for 2023 to fund costs related to economic recovery and attention to the El Niño Event (FEN) emergency. There were 94 votes in favor of the provision, four against and four abstentions. After confirming that Peru is in recession, the administration’s initiative seeks to boost the country’s economy. As mentioned by Alex Contreras, Minister of Economy and Finance.

The project will cost S/5,447 million. This will be financed by S/3,019 million in sub-loan and S/1,025 million with budgetary reallocation of resources for official credit operations, up to a total of S/4,044 million. The remaining S/1,403 million will be obtained through budget reallocation of normal resources.

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The loan includes budget allocations for various sectors, from health to home affairs. Of these, 16 national government agencies will receive funding of up to S/1,256 million. The Ministry of Health (S/506 million) and the Ministry of Transport and Communications (S/314 million) have the highest budget allocations.

On the other hand, resources up to S/328 million will also be provided to the Ministry of Housing, Construction and Health to acquire an emergency and disaster monitoring system.

In addition, various bonds and infrastructure projects are included. For example, up to S/614 million is planned to finance investments for economic restructuring and rapid action. These must be requested within 30 calendar days of promulgation of the law and approval will be received within a maximum of 10 days.

The proposal that requires the largest investment for this concept is the improvement of the elementary, primary and secondary education service of the Integrated Education Institute of Amaybamba in La Convention, Cuzco for S/18 million.

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It is worth remembering that in the first discussed consideration, this type of investment was considered up to S/548 million. After 12 hours of discussion, proposals were added until the final S/614 million was reached.

The initiative also seeks to strengthen education, health and road infrastructure to counter the effects of FEN. For example, S/1,584 million will be allocated to ensure sustainability and continuity of reconstruction with transition interventions. These include flood protection works in La Libertad (S/170 million), Ica (S/103 million), and other regions. In addition, another S/97 million will be allocated for the management of the company’s projects.

The solution?

According to former Deputy Minister of Economy Carlos Casas, the projects included in the initiative are relevant because they prevent against the upcoming FEN. However, as Minister Contreras pointed out, he felt that they would not be enough to help him out of the recession.

“Priority is given to national disaster preparedness. Schools, health centers, supplies and infrastructure to ensure food for children have been improved. […] [Sin embargo], the aggregate is 5% of GDP. It is modest but it is a commendable effort by the Ministry of Economy and Finance (MEF) as different districts have different missions that help generate local employment and mitigate the effects of FEN. The package is going in the right direction, but I don’t think it will boost the economy muchHe explained.

He said the S/4,044 million to be invested is only approximately 1.5% of the total public investment.

“[El paquete] Does not move the needle. We are generally talking about public investment of more than S/35 billion, and debt is 1.5% of that public investment. So that’s not too much either. 80% of national output comes from private investment and private investment or consumption will not move unless there are better expectations.” he added.

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On the other hand, Enzo Defilippi, the former Deputy Minister of Economy, pointed out that it is positive that the MEF seeks to increase public spending, but in this case additional debt is not necessary. As indicated, the low budget implementation – which stood at 47% as of Friday, October 20, 2023 – will allow for the reallocation of resources without the need to request a loan.

“It is unnecessary to ask for additional credit at such a low level of activity. I am sure you will get S/3 billion in unexecuted documents before credit. I don’t find it very responsible that the MEF is looking for additional credits instead of pushing for spending specifications.“, he pointed out.

“I agree that spending should be done when expectations are low, moving the economy is positive, but the money has already been approved and needs to be reallocated, no additional appropriations needed.” he added.

Meanwhile, for Flavio Ausejo, a public policy expert at the Catholic University, the proposed plans are relevant, but not all of them can be implemented, as they only have a deadline of December 31 this year.

“With two months left in the year, I note that this credit is arriving late. Many companies needed resources to finish the year by executing projects and fulfilling their obligations. Credit allows resources to be committed to specific projects, not necessarily the budget allocated to it, but since anything not committed will be in the box, it will be withdrawn.”, he warned.