Government relies on ‘chainsaw’ to maintain fiscal surplus

The Milei administration managed to maintain a fiscal surplus in July 2026, meeting its economic program's goal. The primary fiscal surplus for the first seven months of 2026 was 0.9% of GDP, while the overall budget surplus, including debt interest payments, amounted to 0.1% of GDP. Economy Minister Luis Caputo acknowledged the achievement, crediting nearly 3% of GDP in cumulative tax cuts since the administration's start.

The surplus was realized despite July's high debt interest payments and a 30.4% increase in government revenue year-over-year. However, the administration had to cut spending in sensitive sectors, including energy subsidies (20%), transfers to provinces (19%), social welfare (8.1%), and retirement benefits (4.8%). To sustain the surplus, the government relied on extraordinary revenue from privatizations, but excluding these sales, the primary surplus would have dropped by 26.6% this year compared to 2025.

The administration faces the challenge of sustaining this result as revenue continues to decline, with a goal of maintaining a 1.4% of GDP primary surplus target for the year, committed to the IMF. One controversial measure employed is the underutilization of funds earmarked for national highway maintenance, sparking criticism about potential misappropriation.