Government relies on ‘chainsaw’ to maintain fiscal surplus

The Milei administration managed to maintain a fiscal surplus in July, a key indicator of its economic strategy. In the first seven months of 2026, the primary fiscal surplus reached 0.9% of GDP, while the overall budget surplus, including debt interest payments, amounted to 0.1% of GDP. Minister of Economy Luis Caputo attributed this achievement to tax cuts totaling nearly 3% of GDP since the start of the administration.

In July, the National Public Sector (SPN) recorded a primary surplus of $2.960.333 million and a financial surplus of $244.897 million. This outcome was achieved despite the month featuring a high concentration of debt interest payments. Government revenue increased by 30.4% year-over-year, while yearly inflation stood at 33.8%, resulting in a 2.5% decrease.

To compensate, spending had to increase in sectors like energy subsidies (20%) and provincial transfers (19%). Social welfare and retirement benefits also saw reductions (8.1% and 4.8%, respectively).

President Milei's challenge moving forward is to maintain this surplus as revenue continues to decline. The Institute for Argentine Fiscal Analysis (IARAF) estimates that total revenue declined by 4.6% in real terms during the first seven months of the year, with tax revenue falling by 6%. The government also relied on extraordinary revenue from privatizations to balance the budget. Excluding these sales, the primary surplus for the year would have dropped by 26.6% compared to the same period in 2025.

To sustain the surplus, the government plans to cut spending, a measure that has drawn criticism. Presidential spokesperson Adirán Ravier faced scrutiny after alleging that not all fuel tax funds intended for national highway maintenance were being used for that purpose. He later clarified that funds were used for maintenance, but not entirely. Studies show that only about 50% of the allocated funds have been spent on road upkeep since Milei's administration began in December 2023.