Peru finmin rebuffs ruling party on spending hike

By Patricia Velez and Terry Wade

LIMA, Nov 29 (BestGrowthStock) – Peru’s finance minister rejected
demands to increase spending next year by an amount equal to 10
percent of the proposed budget, saying it would hurt the
deficit as elections approach.

“The size of the budget won’t be moved,” Finance Minister
Ismael Benavides said on RPP radio on Monday.

He said swift economic growth of more than 8 percent this
year has led to new spending requests but stressed that the
country needed to carefully manage its fiscal position to
maintain investment-grade credit ratings and have a cushion in
case European debt woes spread to the world economy.

Benavides has so stridently opposed the new requests —
made by leaders of the ruling APRA party last week — that at
one point he said he would rather resign than approve a big
spending increase, a government source said over the weekend.

Benavides said on RPP radio he thought he had reached an
agreement with APRA leaders. Congress has until Tuesday to
approve the budget. The same government source said Benavides
is expected to stay in his post.

Benavides, a former banker who is a political independent,
was hired by President Alan Garcia in September. Peru holds the
first round of its presidential election in April.

Garcia cannot run for a second straight term, but his APRA
party has fielded a candidate for the presidential race, former
Finance Minister Mercedes Araoz, who is trailing in polls.

Demands that Benavides sharply lift expenditures first
arose in a boisterous session of Congress on Thursday, when
leaders from APRA and other parties urged him to loosen
spending restrictions.

Garcia’s planned budget for 2011 includes an 8 percent
spending hike to 88.4 billion soles ($31.6 billion), up from
this year’s budget of 81.8 billion soles. APRA leaders wanted
to increase spending by another 10 percent or more.

Peru is forecast to post a deficit next year of about 1
percent of gross domestic product.

Peru’s third-quarter public sector fiscal deficit narrowed
to 1.3 percent of quarterly GDP from 3.2 percent of GDP in the
same period last year as swift economic growth lifted tax
revenue, official data showed on Saturday.
(Writing by Terry Wade; Editing by Padraic Cassidy)

Peru finmin rebuffs ruling party on spending hike