- Argentina’s fiscal consolidation effort stands out as a example for Latin America and the Caribbean, thanks to the technical strength of its design and its effective implementation capacity.
- Measures were applied to target subsidies, protect social spending, and improve the technical quality of public expenditure, in terms of both allocative and operational efficiency.
- The reforms helped reduce inflation and achieved a nearly 20-percentage-point drop in the poverty index.
Over the past two years, Argentina has implemented an ambitious fiscal consolidation plan with technical and financial support from the Inter-American Development Bank (IDB), aimed at driving structural reforms that strengthen the business environment and productivity.
Since 2024, the IDB has approved loans totaling US$2.66 billion under policy-based support and specific investment modalities, with the goal of reinforcing the country’s fiscal sustainability through tax reforms and measures to optimize the quality of public spending. These actions are part of the new Country Strategy 2025–2028 agreed upon with the Bank.
In this interview, Juan Luis Gómez Reino, Principal Specialist in the IDB’s Fiscal Management Division and responsible for these recent operations, analyzes the program’s main features and shares lessons learned that can serve as a reference for other Latin American and Caribbean countries seeking to address fiscal challenges at their root.
Argentina’s fiscal consolidation effort is a standout example for the region, both for the technical strength of its design and its execution capacity—focusing subsidies, protecting social spending, and improving the technical quality of public expenditure, in terms of both allocative and operational efficiency.
It also stands out by showing that political ambition in favor of fiscal stability can translate into feasible and effective reforms. Most importantly, it highlights the immediate impact of the reform in reducing inflation and poverty, demonstrating the direct link between responsible fiscal management and the living conditions of the most vulnerable.
The project had a significant impact on key priority areas of the IDB’s institutional strategy to support the region and Argentina, including:
- Poverty reduction: It contributed to a nearly 20-percentage-point drop in Argentina’s poverty index, protecting the incomes of the most vulnerable.
- Resilience: It promoted more efficient use of natural resources by revising energy and water prices and subsidies, which previously created perverse incentives for overconsumption.
- Growth and stability: In coordination with other Bank initiatives on deregulation, it strengthened fiscal stability and simplified tax procedures, boosting economic growth.
This project reflects a continuous client-oriented approach and demonstrates the Bank’s strong technical capacity to respond flexibly and provide high-quality advice to our counterparts’ priorities. Our program was closely coordinated with other multilateral agencies, especially the International Monetary Fund, with whom structural reforms were designed. In fiscal terms, the impact has been extraordinary and unprecedented for Argentina.
The project combined ambition and commitment at the highest level of government, top-quality technical proposals ready for consideration, and a context of approval and public demand.
With a very solid multisectoral approach, this reform achieved a fiscal adjustment three times higher than the regional average of recent decades. This included a tax reform focused on efficiency and incorporating important elements to improve progressivity and horizontal equity.
At the same time, spending rationalization efforts were carried out while protecting the incomes of the most vulnerable and targeting subsidies to low-income households.
I would say it proved that fiscal sustainability is not incompatible with economic growth or with protecting the most disadvantaged. It also showed that the IDB can respond as a single institution to a fiscal challenge, bringing together multiple sectoral contributions in an agile manner and with high added value.
The project positioned us as the key strategic partner in fiscal reform in Argentina, greatly facilitating collaboration in other sectors and laying the groundwork for a second wave of fiscal reforms at all levels of government.