The presentation of the National Budget 2025 project by President Javier Milei this Sunday is surrounded by more questions than details. The political debate that is opening raises the need to reach minimum agreements and strengthens the role of Congress – which must provide legal support to government policies – in a context where taking into account institutions. The IMF’s supervision will also depend on the support received.
Avoiding the expansion of the budget will be a challenge for the governing party in a context where it will avoid having access as much as possible to requests from the rest of the political arc. The “law of laws” was extended in years of crisis or presidential reappointment (2011, 2020, 2022 and 2024) but in this context the Government had enough time to prioritize costs and policy direction, two months after completing one year in office.
The traditional vision of the opening parliamentary debate suggests that the State must first establish obligations regarding the rights of the people and then adjust resources and costs to comply with them. However, Javier Milei’s claims seem more specific: continue with the zero deficit policyand will organize the discussion behind that mantra. The budget clarifies how.
What will happen to economic activity and wages in 2025 is still an open question. The Government has not yet risked a figure for the “recovery” of the economy when they present the progress of the Budget 2025 project in June. However, technicians who expect economic data in the Market Expectations Survey (REM) of the Central Bank predict 3.5 percent growth next year, which contrasts with the drop of 3.8 expected for 2024. Optimistic projections usually mark this type of estimate.
The basics of the zero deficit will be set out in the budget and must be made clear. funding alternatives (lower expenses or higher income) for the next financial year. In 2024, the sums from the previous year were carried over and this gave the Government a big license, which did not hesitate to use it for its purpose. Stop making roads or homes, contributions to the transport fund or regional fund, stop paying debts with energy companies, etc. They were much discussed among politicians and technicians but they needed little justification from the Government; the president banned shouting “blender and chainsaw” in public interviews. This is the first time that the Government discusses its budget project with the Congress, which they defeated and prevented any political proposal.
According to some reports, the ruling party will try to guarantee a 2025 fiscal balance through a clause to automatically adjust cost items based on revenue dynamics.
“It is a copy of what happened in De la Rua’s 2001 Zero Deficit Budget, in a situation where the economy will not go back – as it happened then, and as ‘ can be believed now -, when income falls, the costs are spent. changed down in the same amount. This enables cuts in public salaries, retirement, public works or transfers to areas (that there is not much left to cut today) automatically when the accumulation goes down,” said economist Hernán Letcher in an interview with Page 12.
This is how the a vicious circle of zero deficit“where it’s changed because the accumulation falls, because the economy collapses and then you have to change it again to stick to the zero deficit, causing more decline and decline in accumulation in the future,” added Genaro Grasso of the Cultural Center of the Cooperation.
A new level of negotiation is also opening with the governors of the whole country, which was drafted last Tuesday, taking advantage of the meeting at the Federal Investment Council (CFI), a closing document where they will claim for pension fund debt, public transport money, lack of public work, etc. They all signed except Osvaldo Jaldo, who was a friend of the Government in Tucumán.
It is a question of what will happen to the joint feess. “The income from the Income Tax in 2025 will reach an increase of 47 percent compared to the previous year (and a decrease in GDP of 0.28 pp)”, can be read ahead of the draft budget which the Government sent in. The inflation is expected to be 35 percentin another optimistic bet.
The estimate of how the loss in collection will be compensated for the loss of validity of the December’s PAIS levy remains unfinished (the National Budget Office estimated it will have a negative impact of nearly 1.13 per cent of GDP). Likewise, there may not be many announcements about the exchange rate scheme that will rule in 2025. It remains to be explained how much will go into new funds (IMF, Repo, RIGI or laundry) to understand what happens with this key variable. for the Argentine economy.
It is assumed that the Government likes it the pace of devaluation of the official dollar slowed of 2 percent per month in 2025, but this in turn depends on the inflation path that was anchored at 4 percent in the past months. The possibility of lifting – gradually – the exchange restrictions, or the idea of combining contributions, or dismantling the exchange scheme, is still open. mix for soybean exports. This issue is not so clear on the political agenda of the LLA, and that is a a key part of the negotiation with the IMF.
It is not only a matter of whether the State will be able to cancel the application maturity of debt in dollars, but also those debts in pesos, whose stock almost doubled in the first half of this year. Milei’s promise that Argentina will not take “more debt” in 2025 looks more like a conceptual explanation, not considering as new debt what was issued to cancel current amortization, than a strategy to improve debt profile.
In the last few months the financial surplus decreased so that the Finance Department was still responsible for removing public debt to postpone maturities. More technical analysis presented by Alfredo Zaiat In his note from last Sunday he shows that the public debt/GDP ratio went from 77 to 85 percent.
In the message accompanying the presentation of the 2025 Budget Progress Report before Congress, under the signature of the Minister of Economy, Luis Caputo, and the Chief of Staff, Guillermo Francos, there are four priorities in the next year’s budget policy on the listing . Which seems to focus on the ministries that have the most weight in the Government.
First the “sustainable fiscal balance”, “adopt bold fiscal measures”, it is highlighted, led by Luis Caputo. Second, the message says “the social support without intermediaries” but to maintain the priority of continuing with the zero deficit policy as clarified. Third, “modernization and simplification of the State” It has an ambitious goal that Federico Sturzenegger will face in order to have “a modern, effective, efficient, simple and useful state for citizens,” etc. And, finally, it is planned to deal with “the security and protection equipment and upgrades“.
However, these officials will not take the main directives before the Congress. The role has more of a political function than a debate on a bill of this magnitude.
