Kurt Burneo became last Friday the third head of the Ministry of Economy and Finance (MEF) so far in the government of peter castleand announced that his slogan is to regain the confidence of economic agents to increase employment.
In his opinion, the Peruvian economy would grow 2.2% this year —a figure that differs from the 3.6% released by his predecessor, Óscar Graham— and therefore it is necessary that it rebound up to 5% in order to cover the almost 300,000 young people who enter the labor market annually; added to the fact that 7.8 out of 10 citizens are subject to underemployment and informality.
How will it be achieved?
According to Burneo, resource management at government levels should be corrected since that is the problem that weighs down the sector and not so much the lack of these.
Thus, he states that public investment is functional to private investment, despite the fact that the former represents about a quarter of the total investment, since when -for example- highways are built to connect with remote towns, private investment will see a new focus to participate.
“More than the numerical part, they are the multiplicative effects that the construction of infrastructures have so that the private investment increase. The demand for employment depends on the needs of production and these go in line with having an improved infrastructure”, he noted in RPP.
However, the minister pointed out that in order to bring about a rebound in the economy, better coordination with the Central Reserve Bank of Peru (BCRP), since with the constant increase in reference interest rates, consumption is being limited, and with it, the investment.
“I am convinced that we need to harmonize monetary policy with fiscal policy. The rise in interest rates slows down the effort to reactivate, ”he noted.
In that sense, recalling that Julio Velarde himself forecasts that inflation will fall to 2.5% —within the target range— by the end of 2023, Burneo pointed out that the adjustments to contain inflation must be made compatible with the need for reactivation. In this sense, Burneo points out that “there are no ideologies in the management of the economy” and, therefore, a “pure pragmatism” must be applied.
“It is not necessary to say if you are from the left, right or center. The recipe is unique: we need an adequate fiscal balance. A fiscal rule that complies with deficit ceilings was left aside basically because of the COVID-19 and the need for greater State spending so that the chain of payments does not freeze”, he concluded.
Burneo stressed that from tomorrow he will begin his work at the MEF, and in the coming days he will present the objectives they intend to achieve.
leave the autopilot
Economist José de Echave pointed out that Burneo’s arrival at the MEF will provide the share of leadership that he lacked when Óscar Graham headed it despite being an official with extensive experience in said portfolio.
And it is that, in his opinion, in recent months the economy has gone on automatic pilot because no actions were taken to raise the tax pressure within the framework of a reform; a fact that translates into “a collapsed State”.
It is worth emphasizing that the exemption from taxes due to the rise in the price of some products did not have the expected effect —in Graham’s own words—, and according to de Echave, there is still enough room to have a greater capture of resources, given that the price of copper, despite slowing down, remains at high levels.
Challenges: new projections and the public budget
The other crucial issues for Burneo are the presentation of the Multiannual Macroeconomic Framework 2023-2025, with the new projections for the Peruvian economy, and the presentation of the Public Sector Budget Bill for Fiscal Year 2023, which will be submitted to the Congress of the Republic.
In addition, until July 31, the MEF had to update the National Infrastructure Plan (PNIC), which includes 52 projects to be prioritized by the Executive in order to promote growth, competitiveness and development in the country, from a sectoral perspective and territorial.
When consulted, from the MEF they recognized that there is still no precise date for its publication.
Task. Within minutes of being sworn in as minister, Burneo emphasized to the media that a first priority will be to identify Peruvians who really deserve monetary aid in the face of the inflationary crisis. To this end, the bases of the Household Targeting System (SISFOH) will be updated. “I believe that the allocation of bonds has to respond to the special condition of the citizen,” he said.