For economists and entrepreneurs consulted, compliance with the new fiscal ceiling within the 2025 budget will depend on fiscal discipline and the ability of the State to collect taxes, both from taxpayers and companies.
With the latest amendment to the General State Budget for fiscal year 2025, the deficit of the Public Non-Financial Sector (SPNF) will now be 3.77 %, confirmed the Minister of Economy and Finance (MEF), Felipe Chapman, on Monday, during an event of the National Council of Private Enterprise (Conep).
Chapman recalled that the projection of the deficit of the previous budget was 3.5 percent and now rose to 3.77 %. This falls within the Fiscal Social Responsibility Act (LRSF) for next year’s cap of 4 per cent, the minister explained.
He assured that the figure falls within the recently passed Law 445 of 28 October 2024 of the LRSF, which stipulates for next year a ceiling of 4 %, that the National Government will be able to gradually bring the public debt ceiling to 1.5 per cent by 2030.
In 2026 the ceiling will be 3.5 %; by 2027 it will be up to 3.0 %; by 2028 2.5 %; by 2029 a 2.0 % and by 2030, it is up to 1.5%.
For economists and entrepreneurs consulted, compliance with the new fiscal ceiling within the 2025 budget will depend on fiscal discipline and the state’s ability to collect taxes.
Economist Olmedo Estrada was one of those who pointed out that the 3.77 % cap will depend on how income behaves by 2025, taking into account that the country only has two ways to obtain them, either with tax revenues and not tax.
To this end, he mentioned that the State has proposed that income increase on the basis of improving the relationship with taxpayers in order to lower tax evasion and that more companies can pay their taxes.
If this is improved, as the Director General of Revenue, Camilo Valdés, and the Minister of Economy have said, as a result of more inspectors, controllers, auditors, then we will be able to improve the collection and, therefore, the budget deficit, Estrada said.
Minister Chapman himself said that we are the country that in percentage of collection versus GDP is the lowest, and that is worrying, because we have to look for ways to raise those levels because there are countries that are 17 % or 20 percent; we have to get to that as well,” he added.
The president of the National College of Private Enterprise (Conep), Temístocles Rosas, for his part, indicated that with the increase of the 2025 budget, there was indeed going to be a list of the deficit.
He explained that this composition of the deficit of 3.77 % is closely related to the state’s ability to collect taxes because the 2025 budget is supporting an increase in tax collection.
“I hope we can move forward in this increase in collection that, in my opinion, is a little ambitious, but we hope that the expenses will go in parallel and we do not have a much greater deficit that will lead us to exceed the debt request we need,” Rosas said. See graphic.
The 2025 budget underwent a third amendment, after the MEF welcomed the recommendations of the National Assembly Budget Committee (AN), which required the fulfilment of the funds of several laws, such as 7 per cent of GDP to education, gas subsidies of 25 pounds and decentralization, to mention a few.
So now the budget, which is being discussed in the AN, has gone from $26,084 million to more than $30 billion, after receiving an increase in spending of $3.276 million, of which $1.101 million will be for operation and $2.175 million in investments.
The amount in the 2025 budget would be allocated to 7 percent of GDP for the education sector ($5.832 million), transfers of 100 percent of the property tax collected to municipalities ($83.1 million), allocation of $110,000 per year to each communal and mayoral board ($86 million), allocation of $140 to each retiree and pensioner ($25 million), an obligation to incorporate the budget drawn up by the Social Security Fund without modifications ($732 million), special laws ($300 million) and subsidy ($2.8 billion).
The General State Budget and the LRSF are two related issues, since with the approval of the LRSF the Government will have to manage public finances under a cap on how much should be indebted to GDP.
Chapman explained that the LRSF’s goal is to reduce uncertainty and make money less cost to the country. Many changes in architecture were made, because it includes the concept of how to deal with situations of deceleration or economic contraction, that is, what is known as countercyclical, he said.
In addition, he mentioned that the rule would also strengthen the Fiscal Council and the creation of a new office for State control and monitoring of expenditure.
This article has been translated after first appearing in La Estrella