The data shows that, Although the Government has reported smaller scale surpluses or deficits in several months, the inclusion of Lecaps interests projects a much less favorable image
Since its arrival in December 2023, the current Government has made the fiscal balance one of their main promises, a “non-negotiable” objective that, in its first months, they have shown as achieved. However, discussions about the methods and veracity of this achievement have been present from the beginning. The detailed analysis of the fiscal reports shows that the figures, although they reflect a surplus, hide significant omissions in the management of certain debt interests.
To understand the situation, it is key to break down the tax result in two essential components: the primarywhich includes income less expenses in cash terms, and the financierwhich adjusts this result after subtracting the debt interest payment. Since the beginning of the year, The Government has announced a positive primary fiscal result and an equally positive financial result in most months. However, behind these numbers, some accounting practices cast doubt on the authenticity of the reported results.
Despite occasional accounting adjustments, the Government has managed to show a primary surplus for 10 consecutive months, a result that goes beyond the use of extraordinary income or the postponement of payments in certain periods. Although these practices have facilitated the achievement of the desired surplus in some months, the maintenance of a positive balance during this extended period suggests a genuine basis for the result obtained.
The impact of Lecaps and their omission on the results
A key tool in the Treasury’s borrowing strategy has been the increasing use of Lecaps (Treasury Capitalization Bills). These debt instruments generate interest based on the difference between the issue price and the payment value at maturity. This design allows the Treasury to capitalize interest instead of explicitly recording it, which significantly alters the official financial result by not including these costs as visible interest. Although the capitalization mechanism is not new, the current volume of Lecaps issued and the resulting amount of hidden interest are significant and deserve attention.
To understand the scope of this omission, let’s look at the financial results reported by the government in recent months along with the impact that accounting for Lecaps interests would have:
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The data shows that, Although the Government has reported smaller scale surpluses or deficits in several months, the inclusion of Lecaps interests projects a much less favorable image. For example, in September, the reported financial result was $466,631 million, but, once Lecaps interest is accounted for, the real result falls to a deficit of $2,248,791 million. This omission has a cumulative effect on fiscal results, moving them further and further away from a faithful representation of the State’s financial obligations.
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The reality behind the “containment” of debt in local currency
Although the market is aware of this practice, and at the moment does not perceive significant risks in debt in local currency, this is largely due to the existence of strict capital control. Under the current exchange rate scheme, the pesos in circulation cannot be freely converted to other currencies, so they remain in the local system seeking returns. In this context, debt instruments such as Lecaps continue to find demand, allowing the interest and real deficit they generate to be hidden. However, the underlying problem lies in the latent risk of a structural distortion: the apparent fiscal balance depends in part on accounting management that, if normalized, could generate additional pressures on the financial system.
Conclusion: a fiscal balance under question
The practice of omitting the interests of the Lecaps in the financial result directly affects the transparency of public finances. This method of capitalization and postponement of payments allows the government to show a surplus that, in reality, could be smaller or even revert to a deficit. According to estimates, the total unaccounted interest could subtract around 1.8 percentage points of GDP from this year’s financial result. The question that arises is whether these types of practices are sustainable in the long term and whether the balance sheets presented reflect a real balance or one maintained by debatable accounting methods.
Source: Ambito
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