Commitment to Fiscal Stability


The recently published Medium Term Fiscal Framework 2022 (MFMP) surprised analysts positively. A good news is that the document brought out that a fiscal deficit is expected close to 5.6% of GDP, 0.7 percentage points (pps) lower than that presented in the 2022 fiscal plan and 1.5 pps lower than the deficit. fiscal year 2021. This will be the biggest fiscal adjustment in the last 30 years.

Thanks to this, and this is another piece of good news, there will be a substantial reduction in net public debt, rising from 60.8% of GDP in 2021 to 56.5% of GDP in 2022, with fixed debt anchorages. Very close. New fiscal rule (55% of GDP). These two messages caused the market to react favorably to the results presented in the MFMP, registering appreciation a day after the announcement of 20 and 30 basis points for 5-year and 10-year bonds, respectively.

It is important to highlight that, in any case, the cost of indebtedness and the risk behavior of the country will depend on the new government’s economic guidelines and the government’s economic guidelines. interest rate hikes made by the most important central banks, Which will increase the vulnerabilities of emerging countries.

This good news is largely explained by good prices of raw materials, especially oil and coal, but it is not necessary that we do not think that higher incomes will be permanent and they will exempt us from undertaking structural reforms in various sectors. Will give To give just one example, although the MFMP estimates that the government’s net debt will remain below anchor by 2025, it is plausible that spending pressures will increase due to greater social demands and the need to improve the quality of goods. With which the collection should be scaled accordingly.

As such, there will be a need for reforms in the tax law for increased tax collection, advances in case of evasion and Reducing the imbalance of tax burden between natural and legal persons. Similarly, we should support initiatives that make public spending more efficient, such as eliminating subsidies for higher pensions in collateral.

To send the right signals to the markets and investors, the next government may commit to preserving the advances and adjustment path set by the fiscal rule. Additionally, with the objective of strengthening fiscal stability, making us resilient to external shocks and recovery of investment grade, This would require the search for great consensus in the legislature, An important aspect to be able to process the vast reforms that our economic and social infrastructure demands.

Hernando Jose Gomez R.
[email protected]

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