The Autonomous Fiscal Rule Committee issued this Thursday – December 19 – a new alert regarding the Government’s fiscal cash situation, warning that the pace of expenses is not consistent with the Nation’s income and that due to this, Compliance with the fiscal rule is at risk again.
Given this, they maintain that the Ministry of Finance must implement as soon as possible a series of “structural measures” to face the fiscal, budgetary and cash challenges, taking into account that, for example, the expectations of tax collection and this took its toll on the execution of the 2024 General Budget of the Nation.
“In 2024, the CARF estimates that tax collection will be $15 billion below the updated goal in the Medium-Term Fiscal Framework published in June and $72 billion lower than the tax revenues programmed in the National Budget,” stated the Committee, which maintains its warnings on the matter.
Although it recognizes that in response to the poor performance of collections so far this year, the National Government has made important adjustments in fiscal spending, through decrees of postponement and cuts, and an adjustment in the Annual Cash Plan ( PAC). In the aggregate, the postponement and cutback measures, this has barely given a relief of $20 billion to public spending.
Economic growth
“With the information to date, it is estimated that meeting fiscal spending consistent with compliance with the Fiscal Rule ($289 billion) requires additional measures for around $40 billion (2.4 percentage points of GDP),” they stated.
That said, they noted that the measures should not be solely focused on cutting spending, but rather on optimizing the use of the Nation’s treasury, which is consistent with the fiscal reality and the drop in income, which would not improve in the short and medium term.
“Previously it was estimated that an additional fiscal adjustment was required of $31 billion, on the basis that tax collection would be $10.4 billion below the goal and the cut decree generated an additional fiscal impact of $13 billion. However, in subsequent Government announcements it was confirmed that the cut decree would be executed for $28.4 billion, which implies an additional decrease in fiscal spending of $8.4 billion,” they added.
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However, they recognized that the execution data as of November continues to reflect a lag compared to the same period in 2023 and that the relationship between obligations and appropriations between January and November 2024 is located at 71.1%, which is 8. 3 percentage points below the level observed in the previous period.
“Exercises have been carried out that suggest that achieving the primary spending required to comply with the fiscal rule looks challenging. Converting expenditure execution of the Budget to fiscal execution of the Central National Government, it is observed that primary fiscal expenditure as of November was $283.6 billion. This means that in December primary spending must be at $5.4 trillion to comply with the fiscal rule,” they indicated.
Colombian pesos.
On the other hand, the CARF warned that the current cash levels in pesos pose liquidity risks, since as of December 6, the cash stood at $6.4 trillion, close to the historical minimum (between 2012 and 2023) for that month.
“The weak cash position is a mirror of the inconsistency between spending programming and the capacity to generate structural income. This situation raises concerns about the cash position for 2025 and, possibly, signals structural liquidity difficulties,” they stated.
PGN 2025
The alerts from this team of experts did not focus solely on what is currently happening and also joined those who say that the country is on its way to repeating the mistakes of the past. This, in a context in which the range of action with the rating agencies is ending and the risk premium is still in play.
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The CARF focused its attention on the 2025 National Budget and said that it is necessary to cut it to levels lower than those They were held in 2022, if fiscal stability is to be recovered and cash squeezes left behind.
“A fiscal adjustment of $52 billion (2.9 points of GDP) is required to comply with the fiscal rule regarding the PGN 2025. The final fiscal indicators of this year will impact the situation in 2025. The gap between the expected collection and the goal of tax revenues for 2024, which was used to program the PGN 2025, translates into a lower income base compared to what had been projected,” they stated.
Ministry of Finance and Public Credit
If this adjustment is applied, next year’s Budget would be $472 billion, below the $503 billion in 2024 and slightly above the $405 billion that was managed in 2023. This, without overlooking the large amount of inflexible expenses that the Nation currently has and that will come into play next year. pension reform and the SGP reform will be regulated.
“The lower 2024 collection base will reduce 2025 revenue by $17 billion. Added to this is the fact that Dian’s management revenue estimate is $22.6 billion lower than those included in the PGN 2025, while the non-approval of the Financing Law reduces the collection expectation by $12 billion compared to the previous year. budget that will be decreed,” they explained.
With this on the table, the Autonomous Fiscal Rule Committee closed by saying that it expects the Government to carry out the corresponding fiscal adjustment at the beginning of 2025 and that once the government updates the 2025 Financial Plan, at which time it is expected that it will also The 2024 fiscal closing is published, they will speak out again on the issue.
