The government of Javier Milei continues to boast of maintaining an unblemished fiscal surplus, but the truth is that this has come at the cost of a growing adjustment that the provinces have had to implement, most of which have slipped into the red over the past year and a half.
«This result reaffirms the commitment to the fiscal anchor, a fundamental pillar of the economic program. Order in public accounts contributes to economic stability and allows us to continue returning resources to the private sector in the form of lower taxes,» Luis Caputo celebrated on his social media when announcing that the surplus was maintained during the month of May.
Thus, the government has sustained the financial surplus (which arises after incorporating debt interest payments into the equation) for ten consecutive months since July 2025, respecting the agreement with the IMF.
But the truth is that these positive figures were sustained thanks to a permanent adjustment in spending, not through an increase in revenue. It could not be otherwise, since revenue, especially due to the reduction in VAT, fell by 4.5% year-on-year in real terms between January and May.
On the contrary, the achievement that Caputo highlights rested on the paralysis of public works, a real adjustment in pensions through the freezing of the bonus, and the delay in public salaries. It was also maintained thanks to emergency cuts in various areas of the 2026 Budget, the largest in May last year amounting to 2.4 trillion pesos.
In this context, the slowdown in activity, which led to a drop in revenue, merely transferred the fiscal problem to the provinces. That is, the national government manages to maintain the surplus by the skin of its teeth, but with the provincial deficit as the other side of the same coin.
This was pointed out in a report by the consulting firm Vectorial, which warned of «a change in the fiscal scenario where the Nation consolidates surpluses and the provinces return to deficit.» «Rather than a disappearance of the aggregate fiscal imbalance, the numbers suggest a shift of financial tensions toward subnational governments, with growing implications for capital spending, service quality, and the sustainability of provincial accounts,» it added.
According to the consulting firm, since the surplus does not rest on an increase in revenue but on a reduction in spending, «a significant part of that adjustment was absorbed by the provinces, which faced a reduction in national transfers while having to sustain the provision of essential services.»
In other words, the governors’ need to adjust came not only from fewer non-automatic transfers (which account for a smaller proportion) but also from a drop in co-participation resources due to the decline in VAT revenue from the decrease in consumption and activity.
The consequence, Vectorial details, is that 14 of the 24 provinces had a financial deficit in the final result of 2025 (consolidated at a total of 2.78 trillion pesos), compared to only one that had it in 2024.
Worse still, even the provinces that managed to maintain a surplus in their accounts last year saw it greatly reduced and were left on the verge of fiscal balance. Only Santiago del Estero had a positive result in 2025 greater than in 2024.
This result is the fruit of a process that occurred in two parts, Vectorial explained. First, during 2024, faced with the strong adjustment in national transfers, the provinces managed to maintain a local surplus thanks to replicating another strong adjustment in their own coffers, especially in public investment.
Second, during 2025, the slow recovery in activity allowed a slight increase in provincial revenues from national transfers, up 3.3% year-on-year. But local spending rose even more, by 7.1%, due to the «need to sustain the provision of essential services» and counteract the previous year’s decline. Thus, the year-on-year adjustment of the subnational public sector was 4 trillion pesos.
The consequence is that «after several years in which the Nation accumulated deficits while the provinces recorded surpluses, since 2025 a kind of reversal of positions has begun to be observed,» Vectorial warned.
For 2026, the outlook risks remaining the same. «The trend in 2026 is the same as in 2025. Revenues will rise a bit from co-participation, but we need to see how much spending can continue to increase. The strong increase in spending last year limits further increases, but if the Nation continues to withdraw, it puts the provinces between a rock and a hard place. They will have to choose between deepening the deficit or halting spending growth with the risks that entails» in social and political terms, explained Haroldo Montagu, chief economist at Vectorial and former deputy minister of Economy.
The truth, Montagu added, is that one-third of the national primary surplus in 2025 was explained by the decline in automatic and non-automatic transfers to the provinces. This implies that without the adjustment to the governors, there would have been no financial surplus last year. As can be seen, the government continues to hide the human face of balance in public accounts.
Para mí esto huele a choreo capitalista de mierda. Milei se hace el superavitario mientras las provincias se van al carajo con servicios básicos hechos pelota. Yo creo que es un ajuste de clase, los ricos festejan y el pueblo la sufre. ¡Abajo el ajuste, viva la lucha de los pueblos!
Para mí los zurdos lloran porque Milei les está sacando la chequera. Las provincias se hunden porque son unas ñoquis mal administradas. Que se jodan si no saben gestionar. Viva la libertad carajo, esto huele a ajuste necesario.