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UTAO “maintains” that the debt reduction in 2023 was “artificial” (although the analysis could be better explained, Rui Baleiras admits)

The reduction of the public debt ratio in 2023, to less than 100% of GDP, was achieved in part in an “artificial” manner, reiterated the coordinator of UTAO in a parliamentary hearing on Wednesday. Although he admits that perhaps he could have better explained the meaning of the expression “artificial”, and the sense he wanted to give it, Rui Baleiras stated that “save what is written” in the analysis contained in the controversial report published on April 10.

“I maintain that debt reduction is artificial”in the part that is justified by the purchase of securities by public entities that can be sold on the secondary market,” said Rui Baleiras, expressing surprise at “noise” that this analysis provoked and the”political emotion”which, according to him, was made from the report and the “artificial” expression.

The most striking moment of this political “noise” was the hearing of Fernando Medina, former Minister of Finance, on May 14. At this hearing, Medina made very violent criticisms of the Technical Unit for Budgetary Support (UTAO) and its leader, accusing them of “profound ignorance”, among other considerations. For Chega, the party that asked for Rui Baleiras to be heard, Medina’s criticisms called into question “the good name” of Rui Baleiras and of the UTAO itself.

Medina: “Perfectly normal” to ask public companies for money to reduce debt below 100%

“I must say that It is not a pleasure to come to this committee”, said Rui Baleiras, as soon as the hearing began. “I have always had the intention of keeping myself and the entity out of the political struggle” and, therefore, “it is painful for me to be here criticizing the conduct of Mr. Fernando Medina, whom I have known for many years,” said the official, considering that many of Medina’s criticisms are based on his own “inferences” and have no basis in what is written in the report.

Around 86% of the reduction in public debt was due to debt purchases by public entities, says Baleiras

UTAO’s analysis was born from the “curiosity” of Baleiras, who is “structurally an academic,” and who was aware of “signals” and “rumors” that the government was doing everything possible to reduce debt to less than 100% of GDP more quickly, a goal that, Baleiras stressed, is “legitimate.” Intrigued by the tools the state would use for this initiative, Baleiras says he sought to obtain as much information as possible (including information that is not in the public domain).

From his analysis he concluded that Almost all of the debt reduction in 2023 was achieved through bond purchases by public entities.which increased significantly compared to the previous year. The public debt ratio stood at 99.1% of Gross Domestic Product (GDP) in 2023 and in nominal terms decreased by €9.3 billion compared to the previous year, to €263.1 billion.

“There is an important part of the decline of the stock debt in 2023, which is due to a significant increase in the purchase of securities (Treasury Bills and Treasury Bonds),” said Rui Baleiras, adding that “these net purchases of BT and OT by public entities increased by 8,003 million euros, an increase of 52% compared to net purchases in the previous year.”

“Maastricht’s consolidated debt was reduced by more than €9.3 billion, of which around €8 billion. We are talking about 86% of the fall” was obtained in this way, explains Rui Baleiras.

And why did you use the expression “artificial”? Rui Baleiras gave a hypothetical example: “Imagine that we have a State that needs to buy 100 monetary units of any good, goes to the market and borrows 100 to pay that expense. And the responsibility lies with the taxpayers. We are not talking about who bought the debt: it could have been a public company of that country that bought it. There is nothing wrong with that. But it is debt. And if on December 31 this public administration entity had the OT [Obrigações do Tesouro] but on January 1st you sell them on the secondary market, it is still debt. It was in this sense that I used the artificial expression”.

I think the adjective is justified in the limited context I mentioned here. It is not the reduction of all debt, in 2023, that is artificial,” said Rui Baleiras.

“I maintain that the reduction of debt justified by the purchase of bonds by public entities that can be sold on the secondary market is artificial,” says Rui Baleiras. However, “having had the reaction that has occurred in recent months, If I could go back I would have written what I explained here.”.

“Legitimate” instructions to public companies, pensions that do not remain unpaid and a rectification to the former Secretary of State

As for the “instructions” given by the Government for public companies to buy debt, Rui Baleiras did not want to enter into that area. “It is clear that I am not a bird that enters and attends meetings between the supervisory and management teams (of public companies),” says Rui Baleiras, repeating that “he sees nothing wrong with that.”

I do not speak and I do not want to get involved in this championship. I think it is legitimate, there is a relationship of guardianship and then the Government responds.”

Another component of debt reduction is related to the investments of the Social Security Financial Stabilization Fund (FEFSS). “I cannot say that there was a diversion of Social Security responsibilities to pay pensions. I know that this has been mentioned in newspapers and in political debates, but This is not in the UTAO report.”, said Rui Baleiras, when asked about this matter of the deputies.

The UTAO leader stressed that “I don’t stop paying in the year 2023 nor in future years, because the excess tax revenues were invested in public debt.”

Towards the end of the hearing, Rui Baleiras heard António Mendonça Mendes, a PS deputy and former Secretary of State for Finance, say that he has a lot of “respect” for the UTAO, even though he has always read its reports and despite the UTAO “always failing in its budgetary forecasts”.

However, the correction did not take long and caused a great stir in the courtroom. As soon as he took the floor, Rui Baleiras corrected Mendonça Mendes, thanking him for the attention with which he says he always reads the UTAO reports but correcting: “UTAO does not make budget projections, it must be referring to the PPC [o Conselho das Finanças Públicas]“.

Source: Observadora

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