Libertarian President Javier Milei of Argentina presented the 2025 budget to Congress late Sunday, outlining policy priorities that reflected his key pledge to kill the country’s chronic fiscal deficit and signaled a new phase of confrontation with lawmakers.
In an unprecedented move, Mr. Milei personally pitched the budget to Congress instead of his Economy Minister, lambasting Argentina’s history of macroeconomic mismanagement and promising to veto anything that compromised his tough slog of tight fiscal policy.
The President’s budget proposal followed a week of political clashes in the legislature — where Mr. Milei controls less than 15% of the seats — over spending increases that the administration warns would derail its IMF-backed “zero deficit” budget. Opposition parties have sought to pass laws to raise salaries and pensions with inflation to help hard-hit Argentines cope with brutal austerity.
“The cornerstone of this budget is the first truth of macroeconomics, a truth that for many years has been neglected in Argentina: that of zero deficit,” Mr. Milei told lawmakers, facing a handful of empty seats as most of the hard-line opposition Peronist bloc, Unión por la Patria, skipped his address. “Managing means cleaning up the balance sheet, deactivating the debt bomb that we inherited.”
Milei’s supporters interrupted his speech—packed with his usual libertarian talking points—with whoops and cheers.
It will fall to the opposition-dominated Congress, which controls the government’s purse strings, to approve the final budget. Mr. Milei’s political isolation makes matters fraught, setting up weeks of negotiations with political rivals who insist on concessions.
But Mr. Milei vowed that nothing would stop him from pressing on with austerity.
Matter of principles
“The budget is a declaration of principles,” said Argentine economist Agustín Almada. “Even if there is no compromise from the opposition, Mr. Milei will continue pursuing this fiscal contraction.” If the stroke of a veto pen failed to prevent powerful lawmakers from spending, Mr. Milei promised to find other ways to cut down the state.
“We will only discuss the increase in spending when it comes along with an explanation of what we’ll cut to compensate for it,” Mr. Milei said.
Over Mr. Milei’s past nine months in office, dramatic cuts to public spending—which he says are necessary to restore market confidence in a country ravaged by one of the world’s highest annual inflation rates—have racked up a fiscal surplus (0.4% of gross domestic product), something unseen in nearly two decades.
The austerity has also caused deep economic pain in Argentina, with nearly 60% of Argentines now living in poverty, up from 44% in December, according to the Catholic University. Mr. Milei has largely balanced the budget by slashing financial transfers to provinces, removing energy and transport subsidies and holding wages and pensions steady despite inflation.
Mr. Milei warned that his fiscal shock therapy was not going to be easy. But his administration is betting the worst has passed. Although annual inflation hovers around 237%, Mr. Milei has retained popular support by working to keep a lid on monthly inflation, which has dropped to 4% since its peak of 26% last December when he took office.
In an optimistic statement about the budget Sunday, the Finance Ministry said it expected Mr. Milei’s proposal to result in an annual inflation rate of just 18% by the end of 2025 and yield a 5% economic growth rate. Argentina’s economy contracted by more than 3% in the first half of 2024.
But much of Mr. Milei’s future depends on Congress.
Published - September 17, 2024 08:19 am IST
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