Report Nº: 105620/02/2024


The National Public Administration shows a surplus in January 2024. The main cause is the sharp drop in the real value of social spending, especially in pensions. Given that pensions are at their historical minimum, it is necessary to swiftly migrate towards more genuine sources of support for the fiscal balance.        

A combination of factors showed that the omnibus law project is an unfeasible initiative. No significant progress has been made in the implementation of the DNU, since its application is highly conditioned by legal uncertainty and adverse court rulings that limit its impact. In less than two months that the government has been in power, these setbacks show the difficulties it faces to transform the State and, particularly, to balance the public accounts. Notwithstanding, national officials have emphatically stated that they are sticking to the zero-deficit goal. 

In this context, a report from the Congressional Budget Office (OPC) states that the National Public Administration achieved in January a financial surplus equivalent to 0.2% of the GDP. This means that revenues exceeded expenses, including public debt interest. This result, consistent with the official statement, was achieved thanks to a strong and generalized real value reduction in public spending (except for interest). Within this reduction, the fall in the real value of spending on pensions is the most decisive. 

In order to evaluate this reduction of pension expenditure in perspective, it is useful to observe the trend of the minimum pension –which is the one that best reflects the trend in the real value of pensions– in the current century. Based on historical pension indexing rules, it can be observed that:

  • The minimum pension in 2002 was $83,078 at December 2023 prices.
  • This same value in the average of 2023 was $127,858 at December 2023 prices.
  • In December 2023, the minimum pension was $105,713.  

These data show a persistent and deep deterioration in the purchasing power of pensions. The amount in December 2023 is lower than the average for the whole 2023 and is close to the lowest value it had in the century, which was in 2002. Given that pensions will be adjusted only in March 2024, assuming that inflation in January is approximately 20%, the real value of pensions in January 2024 will be the equivalent of $88,094 at December 2023 prices. In February it will surely be below the real value it had in 2002. In other words, in February, pensions will have the lowest real value of the 21st century.  

The strategy of balancing the public finances based on the inflationary loss of the real value of pensions is shaky. On the one hand, it has a very regressive impact and generates political tensions. On the other hand, it increases the number of pensioners’ lawsuits against the ANSES due to the non-tolerance of the courts to the pensions’ loss of real value. It is not the first time that the fiscal adjustment is sustained on the pensions’ loss of real value, but never with this intensity. The main conclusion is that the January surplus is positive, but very precarious. 

To eliminate inflation and generate a friendly investment climate and good jobs, it is essential to balance public finances. Therefore, prioritizing the zero-deficit target is relevant. But it is also essential to show that the fiscal balance is sustainable over time. If economic agents perceive that, due to social, political and/or judicial resistance, the fiscal balance will not be sustained, the benefits will be diluted. As past experiences show, the adjustment by pensions’ loss of real value leads to wasted efforts, both by society and the government. 

Migrating to a more sustainable fiscal equilibrium, a comprehensive reorganization of the State must be addressed. On the revenue side, progress must be made in the unification and simplification of taxes, and each level of government (national, provincial and municipal) must be responsible for generating sufficient revenue to pay for its expenditures. On the expenditure side, eliminating overlapping between levels of government, organizing the pension system and improving public management are essential. This requires innovative ideas and the capacity to implement them. So far, the government has shown that it has ideas, but lacks the political and technical expertise to implement them.


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