Gustavo Petro’s administration celebrates 100 days in power, and since October 8 the current government has not only promoted several crucial measures for its economic Program, but it has also been immersed in a complex economic situation.
(See: General Budget of the Nation: this is how the $405.6 billion will be distributed).
With galloping inflation and an economy that is slowly showing signs of slowing down, the president and his Minister of Finance, José Antonio Ocampo, They embarked on the task of approving a tax reform of around $20 billion in this period, as well as approving next year’s budget.
The tax, precisely, was one of the most key issues of the 100 days of the government, because it was not only filed on August 8, as a welcome of the new economic policy with which The Government hopes to move from a model less supported by energy mining to an economy focused on agriculture and the environment, but it was also approved in less than three months.
The reform supports almost half of its collection in taxes on hydrocarbons: the non-deductibility of royalties and an income surcharge for oil companies and coal extractors linked to international prices that can reach 15% and 10% respectively. . In addition, it establishes higher rates for natural persons with higher incomes and eliminates a series of special treatments from different sectors.
(See: “It is a victory for the Government”: Ocampo after approval of the Budget).
And although the project emerged triumphant from the Legislature, it received strong criticism from both mining and energy unions and the National Association of Entrepreneurs of Colombia (Andi), who widely criticized the weight placed on the business community by the project, and warned about its impact on growth and employment.
Luis Fernando Mejía, director of the economic studies center Fedesarrollo, assured that “The most important element in these first 100 days in terms of government is the tax reform, this increases the income of the national government by about 1 point of GDP and to the extent that the government decides to allocate this additional collection to pay the debt, it will improve the net fiscal position”.
The other great economic achievement of the government before Congress came from the side of the General Budget of the Nation (PGN) for 2023, since it not only achieved its approval in the Legislative quickly, with less than a day in each debate, but also managed to secure additional resources in relation to the original project.
(See: Tax: they agreed on the final text and it would be voted on November 15).
Although the project that had been left by the last government pursued an amount of $391.4 billion, the Treasury achieved a addition of $14.19 billion, for a total of resources per $405.6 billion. This budget is key because it will finance several of the main government programs for the coming year.
Tax reform
Cesar Melgarejo/ CEET
The first 100 days of Gustavo Petro’s government also brought with them an important challenge: the need to guarantee fiscal sustainability in the medium term. Government projections point to the fiscal deficit this year being 5.6% as a percentage of GDP, but The government also had to take measures to prevent it from worsening due to the Fuel Price Stabilization Fund (Fepc).
Ecopetrol calculations establish that the fund’s account receivable for the second and third quarters of 2022 amounted to $20.4 billion. Hence, the government has announced an increase of $200 per month since October in the price of gasoline, and that the general budget for next year has provided for $19.06 billion for this account in 2023.
(See: Tax: taxes that definitely fell from the reform).
On the other hand, and although it has not yet been determined how the revenue will be distributed with the reform, another announcement made by the government in recent weeks and that marks its roadmap in social matters is the shock plan against hunger, led by the Department of Social Prosperity (DPS).
By December 2022, a transfer of $500,000 is expected to cover nearly 2 million households in situations of poverty and extreme poverty. This includes 1.2 million families who are currently beneficiaries of the Solidarity Income program and 340,000 more families.
A start subject to lower GDP
Although the economy continues to show positive figures in many indicators, one of the challenges that can be seen in the outlook for the government is less economic dynamism, which is already showing its first signs, with more modest growth in the Economic Monitoring Indicator (ISE) or in sectors such as industry and commerce.
(See: Deficit and social spending?: what would the tax collection be used for?).
Likewise, another element that tarnishes the first 100 of Gustavo Petro’s administration is inflation, which escalated in its annual variation from a level of 10.84% in August to 12.22% in October, the highest peak recorded since 1999.
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