In an unusual press conference, the president of the Fiscal CouncilAlonso Segura, warned about the serious deterioration faced by the country’s public finances due to the proliferation of laws with spending initiatives approved by Congress without budget support.
Segura explained that the Fiscal Council decided to call the press—an unusual practice, because it is normal to communicate through written statements—due to the urgency of the situation. “It is unusual for us to be so concerned about State decisions that have negative fiscal impacts,” said Segura.
According to the report presented, in the current legislative period (2021-2025) 229 laws with fiscal impact have been approved, a figure that exceeds the total of the previous 15 years. Many of these regulations, Segura observed, were approved without considering the technical opinions of the Executive, and several even prospered through the insistence mechanism.
The accumulated fiscal cost of these laws amounts to almost 36,000 million soles, more than 65 times what was recorded in the three previous parliamentary periods. Added to this are more than 300 projects with a favorable opinion in Congress that also imply additional public spending, which, if approved, could consume the country’s entire fiscal space until after 2029.
bad future
The Fiscal Council warned that, if this trend continues, the fiscal deficit could reach 6% of GDP and public debt exceed 70% in the next ten years, well above the legal limit of 40% that should be reached in 2034. “It is an unsustainable trajectory. Economic agents will react before these figures materialize,” Segura warned.
The president of the Council also pointed out shared responsibilities between the powers of the State. He recalled that the Executive has left more than half of the laws with fiscal impact unobserved and that, furthermore, only three of them were taken to the Constitutional Court, despite the high costs they entail.
Segura considered it necessary for the Executive to use all available legal mechanisms to stop these measures, and for the Constitutional Court to reinforce the principles of budget balance and fiscal sustainability established in the Constitution.
Likewise, he indicated that the Fiscal Council is willing to participate as ‘amicus curiae’ before the Court, in order to provide technical advice on the consequences of these regulations.
Finally, Segura warned that, if the country does not correct course, interest payments on the public debt could return to levels not seen in three decades, subtracting resources from social priorities and affecting Peru’s credit rating.
“The country could lose its main strength: fiscal stability. If these decisions are not reversed, Peru’s public finances could enter a path of unsustainability,” he concluded.
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