He public spending adjustment in the Argentina since he took office Javier Milei already has a specific dimension: it is equivalent to about US$67 billion in the last 26 monthsabout 10% of GDP. The figure, estimated by the Argentine Institute of Fiscal Analysis (Iaraf)reflects the magnitude of the contraction during the libertarian administration and marks a change in logic: for the first time in decades, the sum of the items stopped expanding to become the cornerstone of the Government program.
The data not only accounts for the recent cut. It also exposes a break in a longer trend from the implementation of the “chainsaw” and the “blender.” According to the Congressional Budget Office (CPO)between 2004 and 2024, consolidated public spending—which includes Nation, provinces and municipalities— went from representing 25.4% of GDP to a maximum of 44.9% in 2016. Although it later went back in time, it remained close to 40% for years.
Only in 2024 did the turning point occur. That year, spending fell 7.1 points of GDP in a single year, to 33% of GDP, the largest drop in two decades and the first significant contraction after 20 years of almost uninterrupted expansion. The adjustment, in addition, was transversal to the three levels of the State: The Nation explained 4.6 points of this drop, while the provinces contributed 2.1 points and the municipalities 0.4 points.
In accumulated terms, the increase in spending in those two subsequent decades was 7.7 points of GDP, according to the OPC. The Nation accounted for most of this expansion, but the provinces contributed almost a third and the municipalities completed the rest.
The main driving force, according to the OPC, was the retirements and social benefitswhich explained almost half of the total increase in spending. The pension moratoriums of 2006 and 2014, together with the nationalization of the system in 2008, expanded coverage—from 60% to more than 90%—and increased the weight of the pension system in the budget. Over time, that peso began to erode due to inflation and changes in the update formulas, until it was reversed with the recent adjustment.
The second major factor was public employmentwith a markedly provincial dynamic. Spending on salaries explained more than 80% of the growth in spending in the provinces and subnational employment grew close to 63%. In the Nation, however, the increase in spending was more linked to retirements and subsidies.
The third key component was economic subsidies, particularly to the energy and transportation. After the tariff freeze after convertibility, the State assumed increasing costs that took this expenditure to record levels. Then there was a partial reduction, an increase during the pandemic and an accelerated decline from 2022. In 2024, subsidies reached one of the lowest levels in almost two decades.
Other items complete the picture. Capital spending was the only one that fell in terms of GDP in these years, which shows that the expansion of the State was concentrated in current spending rather than investment. Debt interests increased relatively little in the period, although they gained relevance again starting in 2018 after the signing of the agreement with the International Monetary Fund (IMF) for US$45,000 million.
According to Iaraf, the reduction in spending in the last 26 months exceeded 10 points of GDP in just over two years, in one of the largest fiscal adjustments in recent history. More than 90% of that cut was allocated to reversing the fiscal deficit and sustaining the surplus, rather than lowering taxes.
The cut, however, was not uniform. More than half of the adjustment was concentrated in three items: non-automatic transfers to provinces, social programs and real direct investment, which explained 53% of the drop in spending in the last 26 months. In turn, the distribution shows that there was no single dominant item: social programs explained 16.3% of the total cut, transfers to provinces 16.1% and public investment 15.2%.
Measured in dollars, The largest cuts were recorded in shipments to provinces (US$12,880 million), social programs (US$12,843 million) and public investment (US$12,097 million). They were followed by energy subsidies (US$9,963 million) and salaries (US$7,279 million). In the case of contributory pensions, the reduction was more limited, with a drop of US$4,517 million, concentrated in 2024, since in 2025 spending returned to levels similar to those of 2023.
The pattern of adjustment reveals a clear decision: to cut mainly discretionary spending—transfers, public works and subsidies—more than the pension core. In parallel, some items increased. The Universal Allocation for Social Protection grew by US$3,656 million, while transfers to the City of Buenos Aires and PAMI also registered increases. It is worth noting that expenses on social items are in many cases indexed to inflation, so they are not subject to cuts.
The consistency of the program is beginning to be reflected in the current numbers collected by the main credit banks. Wall Street. Morgan Stanley highlighted that the public sector once again registered a surplus in February, with a positive financial result and an accumulated primary surplus of 0.4% of GDP in the first two months.
The change in trend is also observed at the international level. In a regional context where, according to Barclays, several countries have a “license to spend”, Argentina appears as an exception. While economies such as Brazil and Colombia project increases in their debt, the country is among the few cases where public accounts remain balanced.
Along the same lines, JP Morgan pointed out that fiscal balance was consolidated as the anchor of the model, while Bank of America highlighted that cutting spending – close to 5 points of GDP – was key to eliminating the deficit and sustaining disinflation.
