9.5 weeks into Milei’s presidency, Argentina sees first monthly budget surplus in 12 years

BUENOS AIRES - The Argentine government in January 2023 saw its first monthly budget surplus in nearly 12 years, as new President Javier Milei continues pushing for strong spending cuts, the Economy Ministry announced.

Background on President Javier Milei

January was the first full month in office for Mr. Milei, a far-right libertarian who took office in December 2022. Milei rose to prominence as a libertarian economist and political outsider critical of high inflation and government debt. He campaigned on a platform of drastic cuts to social services, privatization, and movement toward dollarization of the struggling economy.

"It is the first (monthly) financial surplus since August 2012, and the first surplus for a January since 2011," the Economy Ministry said, according to the official Telam news agency. Mr. Milei has been negotiating with the International Monetary Fund (IMF) over its US$44 billion loan and has vowed to achieve balance in public finances by 2024.

“The zero deficit is non-negotiable,” Economy Minister Luis Caputo said on February 16, 2023 on X, formerly Twitter. Mr. Milei, an economist, has advocated sharp cuts in spending and reducing public debt on the way to dollarization of the economy. The budget cuts come as 45% of Argentinians live below the poverty line.

Argentina's Economic Challenges

Despite its economic potential, Argentina has struggled with macroeconomic imbalances and historic drought, leading to pressures in the foreign exchange market and financial volatility. The country's inflation rose to 94.8% in 2022 and is expected to reach 105% in 2023. The government has faced difficulties in alleviating high levels of poverty, although the unemployment rate fell to an estimated 6.9% in 2022.

Following a 50% devaluation of the peso, lifting of price controls and rate increases, Argentina saw 20.6% inflation in January 2023, with a 12-month rate of 254.2%. The year 2023 ended Alberto Fernandez’s centre-left government, with 211% inflation, one of the highest rates globally.

With 45% poverty, Mr. Milei predicts economic rebound within three months if his austerity plans proceed. However, many economists doubt his projections.