April 22, 2025
Argentina’s President Javier Milei. Photo: Manu Fernandez/AP
The agreement with the IMF requires deeper cuts in the energy sector, which would lead to the reclassification of more than 3.2 million middle-income users and place them in the high-income category (N1), as part of the intensification of spending cuts in the energy sector.
Javier Milei’s government announced that it will implement a new subsidy system for electricity and natural gas rates as part of the agreement reached with the International Monetary Fund (IMF).
The measure seeks to accelerate the reduction of public spending and advance the deregulation of the energy sector, which has already seen significant subsidy cuts over the last nine months.
According to data from the UBA-Conicet Tariff and Subsidy Observatory, more than 2.1 million households lost their low-income status between July 2024 and April 2025, following the update of the Energy Subsidy Access Registry (RASE).
Thirty-eight percent of these users moved directly to the highest income level (N1), which had an immediate impact on public spending, as two-thirds of national subsidies are allocated to electricity.
Economist Julián Rojo explained that this change significantly reduced spending on subsidies and affected households that lost 70% of their monthly bill assistance.
“The government plans to eliminate the current three-tier system and replace it with direct assistance only for vulnerable sectors,” he said. This measure could exclude more than 3.2 million middle-class households that currently receive partial subsidies.
The agreement with the IMF requires deeper cuts in the energy sector, which would lead to the reclassification of middle-income users (N3) and place them in the high-income category (N1), as part of the tightening of spending cuts in the energy sector.
“As recommended by the IMF, the next step could be the reallocation of N3-middle-income households to a simpler scheme. Where would they go? Everything indicates that they would become N1-high-income users,” said Rojo.
However, experts warn of the difficulties of implementing effective segmentation, especially in vulnerable neighborhoods where the electrical infrastructure is precarious and there are no individual meters.
Source: Cuba en Resumen