Javier Milei has initiated a conversation by suggesting a May Pact for Argentina’s provinces.
This fiscal agreement targets a substantial reduction in public expenditure and a balance in public accounts.
Milei’s call to the governors is for a ten-point plan, with the majority aimed at slashing spending to achieve a fiscal balance deemed non-negotiable by him.
Milei seeks to lower public spending to 25% of GDP, a benchmark not seen in Argentina for years.
This target reflects a review of past fiscal practices and a comparison with other regional economies.
In 2023, Argentina’s public spending has hit 37.2% of GDP, according to the IMF. This rate eclipses that of most regional nations, except Brazil and Ecuador.
Argentina’s fiscal position contrasts with countries like Chile and Peru, which are closer to Milei’s proposed threshold.
Research by Invecq shows Argentina’s 2022 public spending at 41.6% of GDP, with provinces and municipalities significantly contributing.
This level surpasses the regional average, highlighting a clear disparity in provincial spending within the region.
Reducing public spending to 25% of GDP, as Milei proposes, aims for efficiency but does not guarantee national success.
Despite high spending rates in developed nations, Argentina’s recent fiscal increase has not enhanced public services, raising calls for reform.
Economists argue that a 25% GDP spending level is unrealistic given Argentina’s current economic situation.
Nevertheless, recent revenue falls due to recession pressure both national and provincial governments to recalibrate spending.
Milei’s administration is revisiting public spending and fiscal sustainability at the provincial level, proposing a relief package as a precursor to the pact.
This strategy seeks to realign Argentina’s fiscal policies with regional standards and promote economic stability.