The president of Colombia, Gustavo Petro, asked the Ministry of Finance and Public Credit to develop a spending austerity plan for 2025. This after the collapse of the financing law in the Congress of the Republic.
The presidential directive reads “the National Government, by virtue of the power established in article 19 of Law 2155 of 2021, annually regulates, by decree, a Spending Austerity Plan for each fiscal period, applicable to the bodies that make part of the General Budget of the Nation, with the commitment to reduce Public Expenditure, within the framework of a policy of austerity, efficiency and effectiveness in the use of public resources.”
They add that under the leadership of the Ministry of Finance, actions are being developed to define the Expenditure Austerity Plan for the fiscal period 2025. This in order to have, as of January 2025, a plan that allows rigorous use and transparent nature of public resources, in accordance with the Budget Management and Public Expenditure Efficiency Policy, and the Public Procurement and Contracting Policy.
In that order, President Petro gave the following guidelines:
-The Ministry of Finance and Public Credit will project for signature by the President of the Republic, in the first week of January 2025, the Decree by which the 2025 Expenditure Austerity Plan is established.
-The Ministry of Finance and Public Credit will receive, no later than December 24, 2024, from the recipient entities of this Directive, the inputs, proposals and other measures that said entities deem necessary or pertinent to strengthen and complement the provisions that, on spending austerity, governed during the year 2024, according to Decree 199 of February 20, 2024, in order to achieve a better Pian de Expenditure Austerity for the period 2025.
-Without prejudice to the foregoing, each public entity must prepare its internal austerity plan project, which they will adjust and update immediately when the Expenditure Austerity Plan is issued by the National Government, for the fiscal period 2025, and will proceed to Publish it on your respective website.
The directive ends by saying that “the 2025 Expenditure Austerity Plan must take into account that the Congress of the Republic did not approve Bill number 300 Chamber of 2024 – 245 Senate of 2024 – Through which financing for the General Budget of the Nation and other provisions are dictated, which forces the national Government to make a greater effort in the austerity of public resources, which makes it possible to reduce or eliminate expenses in those activities that allow it, without affecting the normal functioning of the administration.”
“The definancing of the 2025 Budget is not only due to the fact that the financing law was not passed, but also because the tax revenues that the Government expects to finance that budget, which are not in line with the fiscal and economic reality. For example, they expect the efficiency of Dian’s tax administration to give them $28 billion, and they also assume very optimistic tax collection growth,” said Julio Romero, chief economist of Corficolombiana.
Based on analyst projections, the total cut must be $35 billion to comply with the fiscal rule in 2025.
