News
Date: 23/Feb/2009
Ministry of Finance announces use of sovereign wealth fund to finance fiscal stimulus plan
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The ministry said it would use US$ 4 billion from the Economic and Social Stabilization Fund (ESSF) to finance projects outlined in the fiscal stimulus plan announced last month for investment in public infrastructure, tax cuts and other benefits to boost economic activity and employment. It reported that more than 85% of the plan s public investment had been identified, proof of the rapid execution of this countercyclical measure.
Following a coordinated technical effort among regional government ministries responsible for determining how the additional public investment in the stimulus plan will be distributed, 85% of the funding for new projects has already been identified, with some projects having been initiated in recent weeks. The ministry also announced that it would use US$ 4 billion from the ESSF to finance investments, tax cuts and other benefits outlined in the plan.
The ESSF was established by the Fiscal Responsibility Law for the purpose of saving revenue that could be used to stimulate the economy during periods of sluggish growth. The fund currently holds
assets of some US$ 20.211 billion.
Of the US$ 4 billion destined for the plan, US$ 3 billion will be used to finance expenditures and investments in pesos, and US$ 1 billion for financing in dollars. The ministry has appointed the Central Bank to act as fiscal agent in establishing and executing the sale of the US$3 billion for pesos through a competitive
bid process.
The auction process is scheduled to begin in March 2009 after completing the necessary stages of approval by the Comptroller General of the Republic and the Central Bank. The process will consist of daily auctions of about US$ 50 million, which will be announced in advance.
The finance plan may be subject to modifications if there are significant changes in market conditions. Any changes in the plan will be announced in a timely manner.
