The recently published staff report on Argentina from the International Monetary Fund (IMF) indicates that the national administration under President Javier Milei is dedicated to implementing extensive reductions in social policies and altering the methodology used to calculate inflation.
Last week, the lender of last resort sanctioned a US$2 billion disbursement to the country, as part of a US$20 billion program established in April. The agency’s staff, in its report evaluating the initial review of the deal, outlined the trajectory the country will pursue, revealing several previously undisclosed details. “Continued spending discipline remains essential, and will involve the administration resisting new unfunded spending initiatives,” the report stated, noting that the government is committed to the “ambitious primary surplus objective of 1.6 percent of GDP for 2025.”
The government is set to further decrease energy subsidies, aligning electricity and gas fees more closely with cost recovery levels. The document indicated that this will be accomplished prior to the conclusion of the year. Milei’s administration is set to submit a proposal to Congress aimed at implementing a “comprehensive pension reform” prior to the conclusion of 2026.
On Monday, the President exercised his veto power against legislation aimed at raising pensions by 7.2% and adjusting the minimum bonus from AR$70,000 to AR$110,000 (US$50 to US$80 at the official rate). At present, the minimum monthly retirement pensions stand at AR$384,305 (US$279) per month. The poverty line in Argentina for a household of three is AR$898,336 (US$653). The administration has pledged to implement “tighter expenditure controls as well as efficiency gains in social programs.” It will also implement “enhanced eligibility controls for disability pensions and the Universal Child Allowance (AUH).” The AUH is a social security initiative in Argentina, established in 2009, that provides a monthly subsidy to families for each child under the age of 18 or with disabilities. Currently, around 4 million children are recipients of the AUH.
The government has pledged to consolidate multiple social datasets into a unified registry to enhance oversight of pension recipients by the conclusion of December. In addition to bond issuances and foreign currency purchases, the government aims to enhance the accumulation of international reserves through the privatization and sale of assets. On July 18, the government revealed its decision to privatize the Buenos Aires water and sanitation company, AySA.
The national statistical agency, INDEC, is set to publish an updated Consumer Price Index (CPI), which reflects the inflation rate, prior to the year’s conclusion, drawing on data from the household expenditure survey conducted in 2017-18. The objective is “to better reflect structural changes in cost patterns” and to “improve data quality.” The Milei administration faces scrutiny regarding its inflation measurement methodology, which relies on a 2004 expenditure survey. A source familiar with the situation indicated that the INDEC had been deliberating on modifications, anticipating a timeframe characterized by stable relative prices. Nevertheless, the necessity of completing this task before the year’s end was initially revealed, even to those within the agency, following its publication in the IMF’s staff report.