Quick Hit

Argentina has recorded its first monthly budget surplus in nearly 12 years, a significant milestone under the new administration of President Javier Milei. The surplus, amounting to US$589 million, is a result of stringent spending cuts and marks the first positive balance for public-sector finances since August 2012.

Key Details

• January 2023 marked the first full month in office for President Milei, who has been advocating for sharp cuts in spending and a reduction of public debt.
• The surplus includes payment of interest on the public debt and is the first surplus for a January since 2011.
• Despite the economic challenges, including a 50% devaluation of the peso and an inflation rate of 20.6% in January, President Milei has predicted an economic rebound within three months.

President Milei, a far-right libertarian who took office in December 2022, has been pushing for strong spending cuts as part of his economic strategy. The positive balance for public-sector finances is a significant achievement for his administration, which has been negotiating with the International Monetary Fund over its US$44 billion loan. The president has vowed to achieve balance in public finances by 2024, with Economy Minister Luis Caputo stating that "the zero deficit is not negotiable".

Argentina's economy has been under significant strain, with the peso undergoing a 50% devaluation, the lifting of price controls, and strong rate increases. The country recorded an inflation rate of 20.6% in January, with a 12-month rate of 254.2%. The final year of the centre-left government of Alberto Fernandez ended with a 211% inflation rate.

Despite these challenges, President Milei, an economist by profession, has predicted an economic rebound within three months. This comes at a crucial time for Argentina, with poverty affecting 45% of the population. The budget surplus is a positive sign for the country's economy, indicating the potential for economic recovery under the new administration.