Colombia: Government raises its 2024 fiscal deficit target to -5.3% of GDP
Metodi Tzanov
Helping finance professionals understand what is going on in Emerging and Frontier Markets
The government raised its 2024 fiscal deficit target to -5.3 % of GDP, Finance Minister Ricardo Bonilla announced on Thursday in the presentation of the?2024 financing plan. This represents an increase of 0.8pp from the previous projection of -4.5%. Under this revised outlook, the government foresees a reduction in the total expenditure for the year, estimating it to be COP 409tn, a decrease of COP 17tn from the budget law projection. The minister clarified that this expenditure would be divided into COP 75tn for interest and COP 335tn for primary spending. Additionally, the minister disclosed that revenues are expected to fall below the original expectations set in the budget, attributed to the failure to meet the tax collection target in 2023, arbitration of tax disputes, the court's decision on royalties, and less favorable macroeconomic conditions. However, the minister stressed that the government would comply with the fiscal rule as this allows more room for deficit considering the decrease in oil revenues and the economy's slowdown.
As for financing plans, the ministry estimated that it will seek USD 5.5bn in financing from abroad. The government would also issue domestic public debt for COP 53.4tn, of which some COP 37tn will be raised through auctions in the domestic market.
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On the projections for this year, the government held its GDP growth forecast at 1.5%, in the range of other international onlookers but above the 0.8% predicted by BanRep. Regarding inflation, the government expects a year-end headline inflation rate of 6.2%, up from the 5.7% outlined in the medium-term fiscal plan. The government's projections consider an exchange rate of USD/COL 4,317, less than the 4,607 before, and an oil barrel of USD 78, higher than before.
FinMin Bonilla also stressed that the fiscal balance in 2023 improved by COP 2.6tn compared to the previous scenario and that there was an overachievement of the goal established by the fiscal rule of COP 1.7tn.
Overall, the upward revision of the fiscal deficit aligns with market predictions, highlighting financial challenges for Colombia, especially considering the relatively high fiscal deficit for an economy projected to grow below 3.0%. The budget adjustment is below the financial committee CARF's recommendation, which said that to uphold the fiscal rule in the coming year, the government would need to implement spending adjustments equivalent to COP 23tn (1.4% of GDP).