The numbers are contained in the proposed General State Budget (OGE) for 2024, delivered to the National Assembly on Tuesday and which highlights some of the main factors that marked fiscal management throughout 2023.
The OGE 2023 fiscal scenario was prepared based on an average price of a barrel of oil at 75 dollars and considering an oil production of 1.18 million barrels/day, anticipating a global surplus of 0.9 percent of the Product Gross Domestic Domestic Product (GDP), a primary surplus of 4.9 percent of GDP and a non-oil primary deficit (structural deficit), of 6.5 percent of GDP.
However, forecasts were impacted by declines in oil production in the first and second quarters and the consequent reduction in export revenues and oil revenues.
The drop in the supply of currency in the foreign exchange market resulting from exports and oil revenues, particularly from March onwards, in view of the high levels of external debt repayments, was reflected in the significant depreciation of the exchange rate between mid-May and end of June.
This evolution led to the captivation of expenditure to contain the impacts of lower-than-expected oil revenue and the exchange rate depreciation recorded in the second quarter also caused the containment of the potential fiscal gain with the reform of fuel subsidies announced on June 1st, according to the OGE justification report.
The reform began with the adjustment of the price of gasoline by around 87.5 percent, going from 160 kwanzas per liter to 300 kwanzas.
According to the document, fuel subsidies "continue to constitute one of the main sources of high risk for fiscal balance and sustainability in the medium and long term, so that failure to effectively rationalize this expenditure will continue to remove fiscal space to absorb future shocks and will limit the State's ability to comply with the fiscal anchors established by the Public Finance Sustainability Law and to exchange this expenditure for more productive expenditure".
In view of all these developments, the report highlights, in 2023 the overall fiscal balance of the accounts should stand at -0.1 percent of GDP thanks to the measures adopted by the executive that made it possible to contain a larger deficit and a smaller deterioration in the surplus primary deficit and non-oil primary deficit.
On the other hand, a primary surplus of 5.1 percent of GDP is expected for 2023, "which is of vital importance for maintaining the solidity of public finances, and which is positive taking into account that the other factors that contribute to debt dynamics will have a negative effect on the debt ratio, such as exchange rate depreciation and the slowdown in economic growth".
Regarding the non-oil primary deficit, updated projections indicate that it will remain at 6.50 percent of GDP, still within the time horizon required by the Public Finance Sustainability Law for its reduction within the limits of 5 percent of GDP.
"If the aforementioned measures were not taken, forecasts would indicate a global deficit of 2.6 percent of GDP (0.9 percent in OGE2023), a reduction in the primary balance to 3.9 percent of GDP (4.9 percent of GDP in OGE 2023) and the worsening of the non-oil primary deficit to 7.8 percent of GDP (4.9 percent of GDP in OGE 2023)", indicates the report.
