Argentina cuts subsidies and increases electricity, gas and water bills

The country faces a very high inflation rate, 71% in July in the 12-month period

Louis Rubio / AFP – 05/23/2022 Argentine President Alberto Fernandez is facing very high inflation in the country

Government Argentina Announced this Tuesday, 16th, Elimination of subsidies On gas, electricity and water bills, which will be applied in phases and according to the population’s income and consumption levels. Energy Minister Flavia Royon said at a press conference that the financial savings for 2022 on electricity and gas services will be 47.5 billion pesos (1.81 billion R$). The savings with the elimination of subsidies on the water bill will be 2 billion pesos for the rest of 2022 (76 million reais) and 45 billion pesos (1.71 billion reais) in 2023, according to the head of the Argentine Water Authority. Sanitation Company (AYSA) Malena Galmarini. Treasury Secretary Raúl Rigo said an impact of 0.4 to 0.5% of GDP could be expected by 2023, which would be a “critical contribution to the policy of reorganizing public accounts”. In 2022, tariff increases will only apply in November and December. Flavia Royon said the measure is also aimed at “raising awareness that energy is a resource that we must take care of”.

Argentina maintains subsidized energy and water tariffs, which results in a financial cost that, in a country with no access to external and limited domestic financing, ends up being resolved by issuing cash, generating inflation (71% in July in the 12-month period). Argentina had agreed to International Monetary Fund (International Monetary Fund) to reduce government energy subsidies (0.6% of GDP in 2022) in order to improve the composition of public spending. Moreover, government aid payments don’t only reach the poor because the highest-income part of the population, Royon said, receives 60% of the subsidies. To implement the abolition of subsidies, the Argentine government created a form for residents to prove their need. More than 8.8 million electricity users have been registered, and about 4 million users have not applied.

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* With information from EFE