(Bloomberg) — Chilean President Gabriel Boric on Thursday announced a new package of social spending worth $2 billion as his approval levels fall and the economy shrinks.
(Bloomberg) — Chilean President Gabriel Boric on Thursday announced a new package of social spending worth $2 billion as his approval levels fall and the economy shrinks.
The measures include doubling an annual cash transfer made to the poor and middle class every March to 120,000 pesos ($140) while also creating another handout to help families buy food. Officials will expand a subsidized school lunch program and give discounts on medicine. The government will also provide 50 billion pesos in state guarantees for loans to the construction industry.
The package will cost about $2 billion and be financed from the 2023 budget as well as with additional resources to be announced next week, Finance Minister Mario Marcel said during a televised press conference. Marcel, a former president of the central bank, denied the extra spending would pressure inflation.
Chile starts 2023 with above-target inflation, the highest borrowing costs in over two decades and a shrinking gross domestic product. The anemic economy is hurting Boric’s approval rating while also increasing support for another round of withdrawals from the private pension system.
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“We know that these have been difficult times,” Marcel said. “We know that inflation is probably what has most affected households.”
Inflation has fallen only slightly from the three-decade high reached last year, with increases propelled by staple goods such as food and fuels. Chile’s central bank expects GDP to shrink as much as 1.75% this year.
Chile’s economy will reach an inflection point in the second quarter, when activity will start to pick up and inflation will have fallen to single-digits, according to Marcel.
Meanwhile, legislators have presented proposals to allow people to borrow from their pension funds. One would enable people to tap 15% of their retirement savings — or a total of $22 billion, according to government estimates — to be repaid in 60 installments at 0% interest. Another allows people to tap all their savings with a five-year grace period on repayments.
Roughly 61% of voters disapprove of Boric while only 24% back the president, according to a poll published Wednesday by the Center for Public Studies, a business-funded think tank.
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