Milei wants to define governance ground rules with ‘fiscal stability bill’

President Javier Milei’s government wants to introduce a new bill that would set the ground rules for administrations at all levels of Argentine governance, blocking them from running deficits.

The "Law of National Commitment to Fiscal and Monetary Stability" – which has emerged from Milei’s “May Council” – would introduce 
legal mechanisms destined to guarantee a balanced budget and avoid government deficits.

The bill would prohibit excess spending by central, provincial and municipal governments with the aim of avoiding fiscal risk.

It would also introduce penalties for officials who stray from the rules and Central Bank authorities who break the rule of only printing money which guarantees balance.

Key points:

Fiscal and budgetary rules

The first clause of the legal proposal establishes strict directives as to the "Financial Result," ruling that "the General Budget of the  National Administration must project a balanced or surplus financial result" while unequivocally prohibiting "approval of a general budget law which contemplates a deficit."

An "adjustment mechanism" is provided when implementing the budget. If that entails "diminishing the revenues forecast or increasing the spending beyond the original estimates, placing compliance with the rules at risk,” the Cabinet Chief is authorised to "adopt the necessary measures to re-establish balance," after presenting a Report of Fiscal Sustainability beforehand.
The cuts must be adopted "in the first place in areas not legally subject to a mínimum sum of spending. 

In addition, in order to reinforce disciplined spending, "no government official will be able to take on commitments to pay, authorise, increase or modify spending not authorised by the general budget law and which lack the duly credited funds for their finances."

Furthermore, the government must "abstain from requesting transitory advances from the Central Bank with the aim of financing primary spending."

Budget discipline in Congress 

To control the fiscal impact of legislative initiatives, a "Report on Medium-Term Budget Impact" is introduced. This is required as a "prior requisite for committee treatment" for "every bill implying spending of any kind, originating or modifying spending or which affects the revenues of the national public sector."

The report must contain "an estimate of the fiscal impact of the measure and the specific identification of the source of revenue or the reduction of spending necessary to maintain consistency with the fiscal rule of the financial result.”

Furthermore, a rule "deferred validity" is implemented whereby "every law which establishes or authorises spending not contemplated in the general budget will begin to come into force once the corresponding allocations are specifically included in the general budget law following its approval."

An exception applies when the law "guarantees its financing via assigning concrete, specific, current and sufficient funds, without affecting the balanced or surplus financial result."

Quashing legislation and criminal sanction

The legal proposal establishes direct consequences in criminal law for not heeding the fiscal rules: 

– Nullity: "Any norm approved in violation of the dispositions in this law will be rendered null and void."
– Penal sanctions for irregular spending: Officials violating the fiscal rules contained in the Law of National Commitment to Fiscal and Monetary Stability are to be punished with prison sentences of one to six years with an absolute ban from public office if they "rule, approve, authorise or implement administrative norms which modify or increase the public spending provided in the General Budget without counting on the duly accredited funds provided for their financing."
– Penal sanctions for the irregular printing of money: “A prison sentence of three to 10 years and an absolute ban from public office" is also proposed for "Central Bank authorities who order, authorise or print legal currency in violation of the prohibitions and rules established in its Organic Charter."

– TIMES/NA