Milei presents the 2026 budget: fiscal discipline but increases for pensions, healthcare, and education.

On the same topic:

In a message to the nation, Argentine President Javier Milei presented the main thrust of the 2026 budget, which he intends to use to lead up to the October 26 legislative elections by reaffirming fiscal discipline but including increases in key social spending. This is the government's attempt, following the heavy and unexpected defeat in the Buenos Aires provincial elections on September 7, to reconcile two seemingly incompatible objectives: a budget surplus and increased social spending. Milei defended balanced public finances as "the cornerstone of our government plan and a non-negotiable principle," while acknowledging that the primary surplus will no longer be 2.2 percent of GDP, as envisaged in the agreement with the IMF, but 1.5 percent, in line with the 2025 estimate.

With this primary surplus, the government also expects a budget surplus (before interest expenditure) of 0.3 percent of GDP, while maintaining the lowest public spending-to-GDP ratio in the last 30 years, even lower than the consolidated spending of provinces and municipalities. Milei insisted that the Central Bank will not provide monetary financing to the Treasury, the mechanism that under the previous government drove inflation to 211 percent in 2023 (a record level since the hyperinflation of the late 1980s). The government has introduced a fiscal stability rule that requires revenue or expenditure adjustments in the event of deviations from forecasts. Fiscal balance is here to stay, Milei's message.

The announcement, more moderate in tone than previous ones, included an acknowledgement of the discontent among large segments of the population. "We know that many still don't perceive this in their material reality," the president admitted, speaking of the government's success in remedying a disastrous macroeconomic legacy, and therefore promised improvements in sensitive areas. The budget includes real increases in pensions of 5 percent, healthcare spending of 17 percent, education of 8 percent, and disability spending of 5 percent: "If the budget is the government's plan and 85 percent of it will be allocated to education, healthcare, and pensions, this means that this government's priority is human capital," Milei said. Furthermore, a scheme to cancel mutual debts with the provinces and the possibility of financing infrastructure projects were announced, signals aimed at improving relations with governors and facilitating approval by Parliament, where Milei's party is in a minority.

Markets, however, have greeted the plan with some caution. Analysts warn that official projections, which call for economic growth of 5% and inflation of 10.1% in 2026, appear overly optimistic and could call into question the sustainability of social spending increases if tax revenues fail to match them. Very high yields persist on sovereign and corporate bonds, reflecting investor distrust and political uncertainty on the eve of the elections. Moreover, Milei himself vetoed the pension and disability laws in August, saying that increased spending would jeopardize the budget surplus, the cornerstone of the macroeconomic stabilization program.

The question now is whether the government will be able to secure the support needed to pass the budget in Parliament. Signals to governors and the reallocation of resources to sensitive sectors are part of this strategy, but the memory of the presidential vetoes that blocked various laws in 2024 and 2025 remains vivid . The outcome of the October elections will be crucial: if Milei manages to consolidate political support in the country and in Parliament, he will be able to relaunch the pending structural reforms. Otherwise, the room for maneuver will be limited to maintaining fiscal order in a context of increased international distrust.

More on these topics: