BOGOTA (Reuters) – Colombia will need to cut spending in 2024 by 23 trillion pesos, some $5.75 billion, to comply with its fiscal rule, a committee said on Tuesday, amid uncertainty over whether some income streams will materialize and other canceled income.
The independent Autonomous Fiscal Rule Committee (CARF) said in a statement that the country will meet its fiscal rule – a 2011 measure which imposes policy constraints to block deterioration of public finances – with a deficit of 4.4% of gross domestic product in 2023
But there are risks for next year, it said.
Payment of some 15 trillion pesos, about $3.75 billion, won by the country in court cases against companies and individuals is in doubt, the committee said.
And planned income of about $1.7 billion, included in a tax reform backed by the government of leftist President Gustavo Petro, will not materialize, after the Constitutional Court last month struck down a ban on extractive companies deducting royalties from their taxable income.
The risks will take the 2024 fiscal deficit from the 74.1 trillion pesos predicted by the government in its mid-year fiscal targets to 85.7 trillion pesos, some 5.1% of GDP, the committee said.
Health costs, inflation pressure and spending to deal with energy needs will also put pressure on government coffers, the committee added.
Net debt could increase between two and four points of GDP in the “worrying” scenario, it added.
“More debt puts pressure on the country’s risk premiums and takes public finances away from the objective of fiscal consolidation needed to ensure compliance with the medium-term fiscal rule,” the committee said.
Petro last month said the country should not maintain the fiscal rule in order to boost public investment and promote economic recovery, though he conceded any such decision must be made by Congress.
(Reporting by Nelson Bocanegra; Writing by Julia Symmes Cobb; Editing by Alexandra Hudson)