Milei raises spending despite zero deficit pledge

In Argentina, President Javier Milei announced a new budget plan for 2026 that raises spending in key areas despite his commitment to maintaining a zero deficit. This decision was made in response to significant political pressure and backlash following a series of austerity measures he implemented since taking office in December 2023. These measures included slashing billions in public spending, freezing public works, and reducing federal funding for provinces, leading to adverse social consequences such as increased poverty levels and cuts to university and healthcare services. The austerity measures generated some fiscal successes, resulting in Argentina achieving its first primary surplus in more than a decade and its first full-year surplus in 123 years. However, the economic repercussions were severe, with consumption plummeting and poverty rates rising above 50 percent. Political fallout was particularly pronounced in Buenos Aires, where Milei's coalition recently suffered electoral defeats, indicating the public's discontent with the austerity policies. As a result, Milei's 2026 budget proposal includes increases of 5 percent for pensions and disability payments, a 17 percent rise in health spending, and an 8 percent increase for education funding, all of which are above projected inflation rates. While Milei maintains that fiscal balance is a top priority, he faces formidable challenges in passing this budget without a congressional majority, relying on vetoes to block opposing bills. The upcoming legislative elections on October 26 will be critical in determining Milei's ability to solidify his position in Congress or continue facing significant opposition. The contrasting priorities reflected in this budget demonstrate the tension between maintaining stringent fiscal measures and addressing the growing public outcry for improved social services amidst a difficult economic landscape.