Argentina celebrates its first quarterly budget surplus, President Milei promises continued fiscal discipline

Original source (on modern site) | Article images: [1] [2]

Story highlights

According to President Milei, Argentina recorded a quarterly fiscal surplus equivalent to 0.2 per cent of gross domestic product (GDP) at the outset of the year, accompanied by a third consecutive monthly surplus in March.

Argentina's President Javier Milei in a televised address from the presidential palace in Buenos Aires, announced the country's first quarterly fiscal surplus since 2008, Bloomberg News reported.

While economic challenges continue, Milei said that he would continue to maintain fiscal discipline, saying that the surplus marks a crucial moment in Argentina's pursuit of prosperity.

"The fiscal surplus is the cornerstone from which we are building a new era of prosperity in Argentina," Bloomberg quoted Milei as saying.

According to him, Argentina recorded a quarterly fiscal surplus equivalent to 0.2 per cent of gross domestic product (GDP) at the outset of the year, accompanied by a third consecutive monthly surplus in March.

The announcement sparked optimism among investors, with Argentina bonds seeing a surge in value, driving gains across emerging markets.

According to Bloomberg, Diego Ferro, the founder of M2M Capital in New York, lauded Argentina as a favourable investment opportunity following Milei's address, attributing the positive market response to the country's fiscal achievements.

However, Ferro cautioned that continued structural reforms are essential to ensure the permanence of Argentina's fiscal stability, warning against reliance on short-term measures.

Milei attributed Argentina's rare fiscal surplus to strict measures implemented by his administration, including heavy cuts to transfers to provincial governments and a major reduction in public works expenditure.

The government also adopted cost-cutting measures while inflation rates increased, allowing nearly 300 per cent annual inflation to erode real public spending on wages and pensions.

While Milei's approach has yielded positive fiscal outcomes, Adriana Dupita, deputy chief emerging markets economist with Bloomberg Economics, raised concerns about the sustainability of the strategy.

Dupita highlighted the adverse impact of inflation on public sector salaries and pensions, cautioning against the prolonged erosion of purchasing power.

Since assuming office, Milei has embarked on a series of bold economic reforms to revive Argentina's economy.

These reforms include currency devaluation, restructuring of government ministries, deregulation of prices, and gradual reduction of energy and transport subsidies.

These measures have contributed to a gradual slowdown in monthly inflation rates, marking initial progress towards stabilising the economy.

In his televised address, Milei assured Argentines that their sacrifices would yield tangible benefits, promising a future characterised by reduced tax burdens and enhanced economic prosperity.

As Argentina celebrates its first quarterly fiscal surplus in over a decade, Milei's administration faces mounting pressure to sustain momentum and implement long-term structural reforms.

(With inputs from Bloomberg)

Shashwat Sankranti

Breaking and writing stories for WION's business desk. A literature nerd, closeted poet and a novelist (in the making).