Miley implements small pension reform by decree

Without a majority in Congress to approve his policies, Argentina's President, Javier Miley, issued the second Decree of Necessity and Urgency (DNU) for his state on Monday, March 25.

This time the decree implements a small pension reform.

In short, pensions will be readjusted to monthly inflation with a delay of two months.

The new formula will come into effect from July. From April to June, there will be a transition period that includes elements of the formula inherited from Alberto Fernández's government, which links pensions to salaries and government revenues.

Miley has outlined his plans to reform the pension adjustment system and align it with inflation since December.

The mini-pension reform was in the original text Comprehensive renovation package It will be sent to Congress at the end of 2023.

I went withdrawal From the text during the package negotiations, which ended up happening fell on the groundIn full, at the plenary session of the Chamber at the beginning of February.

Why is mini-pension reform important?

The government's interest in pension adjustments is consistent with the goal of closing the fiscal deficit achieved in January and February, despite Unsustainable method long-term.

Pensions are the main expenditure in the public budget.

Social Security, which also includes retirement pensions and social assistance, represented more than 46% of the 2023 budget.

Why would Miley want to match pensions for inflation?

Economist Nuria Susmil explains that the pension readjustment formula that was in place made the zero deficit target difficult.

“The readjustment of pensions was linked to salaries and tax collection. Therefore, pensions can grow above the rate of inflation and create more problems for the deficit.Sosmil says.

According to the economic expert. “Whenever the pension adjustment formula is changed, the intention is to reduce costs.”.

With Monday's decree, Miley is betting on the current slowdown in inflation as a way to reduce pension costs.

Monthly inflation reached 13.2% in February after it was recorded 20.6% Monthly in January and peak 25.5%in December.