Argentina Keeps Primary Surplus but Faces Strain from Debt Costs

Argentina’s Ministry of Economy reported that the country achieved a primary budget surplus of 1.75 trillion pesos in July 2025, equal to about US$1.27 billion.

It marked the seventh consecutive month of positive primary results, in line with President Javier Milei’s policy of keeping the fiscal balance at zero.

The official bulletin also showed that, despite this surplus, the overall financial balance for July was negative by 168.5 billion pesos because the government paid 1.92 trillion pesos in debt interest.

From January to July, the government accumulated a primary surplus equal to 1.1 percent of GDP and a financial surplus of 0.3 percent of GDP. These figures confirm that the adjustment plan is holding through mid-year.

Finance Minister Luis Caputo emphasized that July’s primary surplus was 41 percent higher in real terms compared to the same month of 2024. According to the ministry, total revenues grew 2.8 percent in real terms, while primary expenditures fell 1.3 percent.

The government shielded social spending, which rose 5.7 percent in real terms in July. At the same time, it reduced economic subsidies by 15.4 percent, led by a sharp 34 percent fall in energy subsidies.

Transport subsidies, however, rose almost 50 percent. On the expense side, payments for pensions grew 16.7 percent in real terms, helped by slowing inflation, while transfers to provinces increased 3 percent.

Falling Revenues and High Interest Costs Strain Fiscal Balance

The sharpest cuts came from public investment, which dropped 41.6 percent year-on-year, payroll expenses, which fell 11.7 percent, and energy subsidies, which were halved compared to last year.

Yet analysts note that government revenues show signs of fatigue. In the quarter ending in July, total real revenues dropped 5.1 percent from a year earlier, and tax collection fell 5.7 percent.

The decline followed a 3.8 percent fall in the second quarter. The government faces the challenge of keeping the fiscal anchor steady while economic activity remains subdued.

Inflation dynamics explain much of the picture. Consumer prices rose only 1.9 percent in July, with an annual increase of 36.6 percent.

Slower inflation means pension payments and some social transfers gained ground in real terms, even if nominal adjustments looked modest. Lower inflation also raises the real value of spending commitments while revenues reflect weaker activity.

The government’s approach produces surpluses before debt service but struggles to overcome the weight of high interest obligations.

July highlighted the imbalance, as semiannual bond payments and the public-sector bonus turned the month into a deficit despite tight control of other expenses.

Maintaining surpluses for the year will depend on stabilizing revenues while continuing to cut politically sensitive subsidies.