Argentina Lower House Unexpectedly Rejects 2022 Budget Bill

(Bloomberg) -- Argentina’s lower house of congress unexpectedly rejected the government’s 2022 budget proposal, a blow to President Alberto Fernandez as he enters the second half of his presidency. 

After a marathon session that lasted over 22 hours, 132 lawmakers voted against the bill, 121 were in favor and one abstained. A new proposal would have to be sent to congress, though the government could also extend the current budget with a presidential decree. 

The vote was a defeat for Economy Minister Martin Guzman, who spent several hours earlier this week discussing details of the budget in a congressional committee. It also adds uncertainty to Argentina’s negotiations with the International Monetary Fund to reschedule payments on over $40 billion in debt.

A payment of $1.8 billion is due to the Fund on Dec. 22, as part of the current calendar that Argentina seeks to renegotiate. 

Fernandez spoke to IMF Managing Director Kristalina Georgieva Friday afternoon to review the state of negotiations. Fernandez’s spokeswoman said the call was scheduled well in advance of the vote in congress, but it became a subject of discussion. 

“We both recognized the unexpected problem of the rejected budget, but we committed to continue working fully focused in materializing an agreement that wouldn’t compromise the continuity of the inclusive economic recovery,” Fernandez tweeted.  

The budget proposal was questioned for months since it was sent to congress in September. Fernandez’s administration forecast inflation of 33% for next year, way below expectations that currently stand at 50%. Guzman penciled in 4% economic growth for 2022, while the IMF estimates it will be 2.5%. 

“The vote reflects a more fragmented congress following the ruling coalition’s loss in the Nov. 14 midterm elections,” said Tomas Arias, political analyst at XP Investments. 

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