Javier Milei’s Plan: A 14% GDP Reduction in Government Expenditure

Milei’s fiscal belt tightening would focus on slashing expenditures on subsidies for utility bills, like gas, electricity and water, as well as federal government transfers to poor provinces

Argentina Presidential Candidate Javier Milei Interview
By Ignacio Olivera Doll
September 22, 2023 | 11:31 AM

Bloomberg — Argentine presidential candidate Javier Milei often says he plans to make steep government spending cuts as part of an ambitious austerity program to balance the budget in a country infamous for chronic deficits.

Milei’s fiscal belt tightening would focus on slashing expenditures on subsidies for utility bills, like gas, electricity and water, as well as federal government transfers to poor provinces, according to a person with direct knowledge of the campaign’s economic strategy.

While Wall Street investors would applaud moves by Argentina to balance the government’s books, many observers doubt that the 52-year-old economist can achieve such dramatic results so quickly. Previous austerity campaigns, such as one in 2019, only drove the economy further into recession as subsidy cuts fueled inflation, reducing consumers’ purchasing power as unemployment climbed.

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And a cornerstone of Milei’s budget proposal — rolling back total outlays for family social subsidies nationwide while focusing on the low-income households that really need it — has proven technically problematic. President Alberto Fernandez’s government long promised to strip out subsidy spending for the wealthy but was never successful.


Milei has discussed cutting expenditure equivalent to 15% of gross domestic product but so far the tally is closer to 14% as estimates continue to evolve, according to the person, who asked not to be named discussing Milei’s economic strategy. Either way, it would be one of Argentina’s most ambitious austerity programs.

Here how Milei would cut spending if he wins the presidential election Oct. 22. A new government takes office Dec. 10.

  • 5% of GDP to be cut from federal government transfers to provinces
  • 2% of GDP to be eliminated by privatizing public works
  • 5% of GDP to be adjusted in an overhaul of the subsidies program, directing support to the neediest households, rather than companies
  • 1% of GDP to be cut by eliminating privileged retirement packages granted high-ranking government officials
  • 1% of GDP to be reduced by selling or closing unprofitable state-owned companies

Milei already has compiled a list of companies that his administration is likely to consider selling or closing. In his ‘top five’ are Aerolineas Argentinas, state-owned television channel TV Publica, state news agency Telam, the National Radio and state-owned energy company Enarsa.


The sale of the state-owned oil company YPF would not happen right away: Milei’s team would first conduct a thorough financial analysis so as to be in position to sell it well above its current book value. This may take more than a year, the person said.

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Crucially, the central bank will stop issuing pesos from “day 1″ of a Milei administration. If the official peso has not been adjusted by then, the government will devalue it to a level close to its current market level — the parallel dollar level — and impose a fixed exchange rate.

Additionally, Milei’s team plans to send Congress legislation to legalize the currency’s free float and voluntarily propose dollarization.

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