The “new” 2026 budget proposal is taking shape as follows: An important part of economic policy Pension reform will remain on the waiting list if, following an election victory and a cabinet change, the government can reach sensible agreements with governors and appropriate interlocutors from the ruling and opposition parties to advance long-delayed reforms such as tax and labor reform, starting next summer.
Apart from economists and other financial experts, not many people know that since taking office, the government of Javier Millay has had to deal with the National Budget Law promulgated in 2023 by Alberto Fernández. This is an unprecedented case since the majority of opposition parties in parliament refused to approve the bill for 2024 and 2025, which was extended by government order for two consecutive years..
Paradoxical as it may seem, therefore, a significant portion of the opposition offered the government an alternative use for “chainsaws, mixers, and freezers.” Discretionary yet restrictive adjustments in public spending Through Decree of Necessity and Urgency (DNU) or Administrative Decision (DA). Unlike before, it was not used to increase spending, but to achieve a primary budget surplus and fiscal balance.
This turning point was remarkable, Mr. Iaraf said, considering that in the 63 years up to 2024, more than 57 countries had primary budget deficits financed by inflationary taxes (in pesos) or debt (domestic or external). Generally, As I pointed out in this column last July, those were “rubber” budgets..
After October’s parliamentary elections, all indications are that the 2026 budget will now become law. Not only has parliamentary deliberation been postponed until after December 10, when members of the ruling party and allied parties will hold more seats, but an extraordinary session of parliament has already been convened to approve the bill after a heated debate in the House of Representatives. but Difficult negotiations with state governors discountedHowever, 18 of these countries signed the May Agreement, which makes fiscal balances “inviolable” in 2024.
To be precise, one of the main changes in this project is the “fiscal rules” for 2026. Its application will force the maintenance of a primary surplus (the difference between income and expenditure excluding interest payments on public debt) and balanced financial results of the Public Administration of State (APN), which accounts for more than 90% of the expenditures of the State Non-Financial Public Sector (SPNF, excluding public companies). If your expenses exceed expectations or your income decreases, you may need to adjust items to keep your accounts balanced.. Additionally, expense and debt limits can only be changed by law or the DNU approved by Congress, and the source of funding must be determined in advance.
necessary reforms
The progress recorded in fiscal matters over the past two years was explained as follows. 3 renowned specialists Remarks at an illustrative conference held a month ago by ASAP (Argentine Association for Budget and Public Finance). However, also They raised the need to reform or abolish some institutional norms that have been outdated for decades and are distorting and complicit in more efficient management of public accounts.We’ll see later.
Guido Langoni, ASAP Vice-President, highlighted that APN spending decreased by almost 6 percentage points of GDP, from 19.9% in 2023 to 14% in 2024, and maintained this level in the 2025 and 2026 calculations. The peak of expenditure was 24/25% in 2015/2017 and 25.7% in 2020.
He also said that although this year would see a 27% decline in real terms and a balanced financial result (slight surplus) to be achieved in 2024, without deducting capitalizable interest which, if properly recorded, would lead to a deficit.
This is because the Financial Management Act 1992 (LAF) provides for interest on this type of debt instrument (such as Lecap) to be accounted for on a ‘below standard’ basis, taking into account that it is not possible to calculate it in advance. but That’s how to hide them. For the case, The Broda study calculates that, including capitalized interest, the budget deficit in September would have amounted to 2.7% of GDP.However, the interest rate, which had risen to 60% in the previous auction this month, has dropped to 36% and the redemption period has been significantly extended.
Regarding, Macroeconomic forecasts for 2026Ranguni considers them too optimistic The results were compared with the results of the Market Expectations Survey (REM) conducted by the central bank in September. For the case, The official project forecasts GDP growth of 5% (3% in REM), annual inflation of 10% (19.5%) and December exchange rate of $1,423 ($1,812).
Experts say higher-than-calculated inflation means that without expansion, current and capital expenditures would be 1.9% lower in real terms than expected in the budget. Of the total of $148 billion (14.2% of GDP) with the same amount of funding, more than half ($84.4 billion) corresponds to social security, adjusted for inflation (excluding fixed bonuses on the minimum wage and mobility of family allowances).
On top of that, The project will abolish spending “caps” for sectors such as education, science and technology, and national defence, but the fiscal quota for the knowledge economy will be expanded and is expected to be automatically transferred through collective participation to local areas. In addition to the $73.9 billion, it includes $3.6 billion for specific programs that require Congressional approval upon passage of the law.
Controversial DNU
In the ASAP debate, Marcos Macon (former undersecretary and first director of the Congressional Budget Office from 2018 to 2023) said he considered it contradictory that the 1994 Constitution created the DNU and prohibited its use for tax, electoral, and political party reform, but not for the purpose of changing the structure of the national budget, and that the DNU is an essential instrument of the republic. For further information, except for the period 1994-1996, it adds: With more than 100 budget DNUs issued in the first decade, Argentina is the only country in the world that can increase public spending by decree. However, eliminating them would require a constitutional amendment.
Still, he questioned a last-minute plan generally approved by opposition members to automatically abolish the DNU through a single-chamber rejection (which was sent back to the Senate for review). He explained that the LAF article (No. 37) leaves Congress with decisions that affect the total budget and program debt levels, as well as items that refer to retention and intelligence costs applied in 2020 and 2022.
On the other hand, in presidential election years, he proposes extending the budget until April of the following year, so that the administration taking office in December, rather than the outgoing administration, can prepare the budget. And he stressed that since budget laws are only valid for one year, permanent regulations should be prohibited, as allowed by the Permanent Supplementary Budget Law (11,172) dating back to 1930.
More than a year ago, former National Budget Secretary Alcides Saldivia (who recently passed away) described this norm as follows: “It is a dumping ground where all the budgetary and non-budgetary residue and distortions authorized by the annual legislation, which currently has 180 provisions, end up.”. He also considered the following law: Private cooperation organization (23.283) as “A source of great privilege to circumvent budgetary regulations.”.
Ricardo Gutierrez, former Secretary of the Treasury, agrees that the permanent supplementary law is “an eyesore to the enormous institutional gravity” and emphasizes that the national budget has long ceased to serve as the “law of the law” assigned by the Constitution.
“Since the 1994 reform, this is just a law, even though it is a fundamental institution of a republic and democracy. In countries like the United States and Italy, there are legal deadlines for approving the budget, and if the deadlines are not met, the administration is shut down until the budget is approved. This is not the case in Argentina,” he added.
It is also explained that some countries in the region have organic laws to institutionalize public policy that, unlike others, require approval or repeal by special legislative majorities. In Argentina, one law can be replaced by another or violated without further processing, as happened with the fiscal agreement. As another illustrative example, he cited the law passed in 1999 (25,552) that established the fiscal balance, its measurement, anti-cyclical funds, etc., and that although this law has been implemented, painted cardboard. “Had these measures been institutionalized, the sad default of 2001 could have been avoided,” he exemplified. “To restore market confidence, we need to maintain fiscal balance and reduce country risk to 100 basis points,” he concluded.
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