The Autonomous Committee of the Fiscal Rule (Carf), created from the tax reform of last year issued its first official pronouncement, in which it reviewed the Financial Plan presented two weeks ago by the Ministry of Finance. The Carf highlighted the effort of the National Government to improve fiscal results and projections in the face of a better perspective of income and economic performance, despite the greater spending pressure generated by interest on the debt and the pandemic.
(Autonomous Fiscal Rule Committee will issue concept after Financial Plan).
The Carf recognized that although the fiscal scenario presented for 2022 allows the Government to comply with the transition proposed by the Law for the Fiscal Rule, “preliminary estimates show that, despite the effort to reduce the deficit in 2022, the Structural Net Primary Balance (BPNE) would close the year with a deficit between 3 and 4 percentage points of GDP, higher than the one that would result from applying the formula for the Fiscal Rule, to which it must converge in 2026”.
Among the conclusions delivered by the Committee, it stands out how the Financial Plan shows a change of transitory capital income for current income, plus
permanent, which gives greater certainty and credibility to the short-term fiscal strategy and also highlights the effort made by the Government to keep primary spending figures unchanged in 2022 compared to 2021, in a context of higher inflation.
(Despite a smaller fiscal deficit, challenges remain with the level of debt.)
The Carf maintained that, “In the short and medium term, additional income and expenditure measures will be required, to those already contemplated in the Social Investment Law, to reduce the primary deficit to levels compatible with the Fiscal Rule and achieve a permanent reduction in the debt ratio to GDP”.
According to the committee, only in this way can the sustainability of public finances and macroeconomic balance be guaranteed.
The president of Carf, and also president of the Colombian Stock Exchange, Juan Pablo Córdoba, assured that “The government deficit remains high and is reflected in macroeconomic imbalances.” And he said that, despite these efforts, they make a call to continue on that path and converge to the fiscal rule in 2026.
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