Despite the fact that much of the year has already been supplied and normally at this point in the game it is usual for the economic rhythm to enter into process mode, the situation that the local market has experienced in the second half and the fulfillment of the alerts that were given at the time in the face of overestimated revenues, they maintain pressure on the fiscal rule.
Knowing whether or not the limits that serve as a guarantee for analysts and risk rating agencies will finally be met is one of the central issues on the economic agenda, since debt levels remain very high and income from tax concepts is not They are the best yet.
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A report from the Bank of the West and Anif also took on the task of reviewing what is happening on this front and one of the first topics they addressed was tax collection, highlighting that as of September it reached $206 billion. which represents a drop of 8.2% compared to the same period of the previous year.
“This decrease is mainly due to a strong contraction in the income tax, which experienced a drop of 17.4%, attributed to a reduction in the collection of tax contributions. On the other hand, external taxes also showed a decrease of close to 10%, driven by a marked drop in external VAT. However, the internal VAT presented an increase of 5.1%, representing 27.3% of the total collection,” they indicated.
Minister of Finance, Ricardo Bonilla.
Courtesy
Here it must be added that with a cut to October things seem not improve, since the figures suggest that the shortfall would rise to $9 billion, while at the end of the year it would be between $11 billion and $12 billion, based on the adjustment that had to be made in June when it became clear that tax revenues They are not the best.
That said, the report adds that budget execution between January and October 2024 stood at 62.9%, a figure that is below the historical average of 69.6% for the same period between 2016 and 2023.
“By breaking down the execution by components, a significant lag is observed in the investment budget, which only reached 39.2% of the total, compared to a historical average of 53.7%. The execution of operating expenses was 66.7%, also below its historical average, while the execution of debt service remained relatively aligned with what has been observed historically,” they noted.
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These two elements have been the most important for all analysts, since it has been said that the country is spending more but its cash flow is lower when compared to previous years. All of this leads to the monetary authorities having to resort to debt to comply with budget allocations, putting pressure on the limits of the fiscal rule.
“It is estimated that total income for 2024 will be 276.2 billionwhich represents a difference of 12.5 billion with the Government’s projections. In the base scenario, total spending is expected to amount to $371 billion, in line with the cuts announced by the Government. This scenario suggests that, if the spending cuts are met, the National Government could comply with the fiscal rule, reaching a fiscal balance of -5.6% of GDP, which is the maximum limit allowed,” they explained.
Ministry of Finance and Public Credit.
Photo: CEET – Néstor Gómez
In this way, the theory is reaffirmed that compliance with the rule will occur in “photofinish” and that everything will depend on the fiscal moves that the Ministry of Finance makes with this year’s National Budget, suppressing expenses as much as possible. However, this situation will have a cost: economic growth.
“If the Government fails to implement the announced spending cuts and accelerate budget execution in the remaining months of the year, compliance with the fiscal rule would be at risk. This could have adverse effects on the country risk premium and could trigger a credit rating downgrade. by the agencies that currently have the country in a negative perspective,” the report reads.
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Despite the challenges, these experts closed by recognizing that the fiscal crisis that Colombia has faced since the Covid-19 pandemic has made it difficult to return to a lower deficit, unlike other countries in the region, and that the high burden of Interest and inflexibility in certain spending items, such as transfers to the General Participation System (SGP), have perpetuated the fiscal shock in the country.
“In conclusion, there is a challenging fiscal outlook for Colombia in 2024with declining tax collection and budget execution below expectations. The Government’s ability to comply with the fiscal rule will depend on the effective implementation of spending cuts and the management of tax revenues in an uncertain economic context,” they concluded.
Economic recession
PHOTO: iStock
As it is, we will have to wait how the year ends on this front and if the Minhacienda finally manages to adjust its cash. We must not forget that a few weeks ago it was announced that the Government is working on a PGN cut of $33 billion that would cover the $20 billion that was frozen in May and an additional $13 billion, which would focus on operating items.
It must also be said that these debates are the input for conversations about what should happen with the 2025 Budget, since the errors of the past would be repeated and there would once again be overestimated income that They would generate risk to the Nation’s treasury, in addition to the financing law.
