Government increases spending on salaries and wages by 4.5% in the 2023 General State Budget

In a context where the vast majority of the world’s economies have not fully recovered from the Covid-19 pandemic, even more so in a situation of instability in goods and capital markets due to the war in Ukraine, pointing this process to a new economic recession next year with a higher inflation rate, the Government projects in the General State Budget PGE 2023 a rise of 4.5% in spending for salaries and wages in the state apparatus.

The document presented by the Minister of Economy and Public Finance, Marcelo Montenegro, suggests that in the present management Bs 45,235 million were allocated for the payment of salaries and wages, which amount grows to Bs 47,253 million (4.5%) for the next management. The teaching and health, Police and Armed Forces sectors concentrate the largest portion of the resources destined for the payment of salaries.

The PGE 2023 contemplates an increase in the amount for the payment of salaries and wages of public servants who depend on state companies. Thus, the amount allocated for this purpose goes from Bs 2,774 million (2022) to Bs 3,177 million for next year.

In terms of salaries and wages, according to Montenegro, the bulk of the payment corresponds to the Police, Armed Forces and the teaching and health sectors, which make up 58.1% of the budget.
“This expense is made throughout the country. Teachers, doctors, police officers who guarantee citizen security in all Bolivian municipalities and the Armed Forces deployed in the country are paid,” noted the minister.

In the opinion of the president of the College of Economists of Santa Cruz, Juan Pablo Suárez, the trend of increasing current spending dates back several years. “We see that there is a high fiscal deficit, we have a high budget for hydrocarbon subsidies that has become a current spending item. The trend should be the other way around, reduce the fixed costs of the national government to reduce the fiscal deficit, which is debt and is paid by generations that have nothing to do with spending, our children and grandchildren,” he said.

Judging by the economist Mauricio Ríos García, the hiring of supernumerary public employees and the increase in their salary constitute electoral bribery, a perk. “It is a very big irresponsibility, because, although a comparative reduction is observed with respect to this year, the fiscal deficit continues to be too high,” he said.

He noted that the Government underestimates the growing risks of the national economy (especially in the banking and financial system) and the global economy, which is heading towards a complicated scenario of inflationary stagnation. “The PGE 2023 illustrates that the room for maneuver in the face of any eventuality is less and less. It is a risky bet,” said Ríos.

The financial analyst Jaime Dunn affirms that the budget is based on the Productive Community Social Economic Model, intensive in spending and consumption. “Wages and salaries, without taking into account the IDH and the IHD, exceed tax collection. There is a very large number of employees -more than 520,000- and this puts strong pressure on spending and the fiscal deficit”, he pointed out.

For Antonio Saravia, PhD in economics and director of the Center for the Study of the Economy and Liberty at Mercer University (USA), in order to reduce public spending and gradually eliminate debt, dozens of inefficient and loss-making public companies must be removed from the environment.