The Colombian Congress has approved a $81.3 billion USD (235.6 trillion pesos) budget for 2018, a sum that highlights the country’s ongoing struggle to adjust to low oil prices and slow economic growth. The total is just a 1% increase over the 233.1 trillion peso budget for 2017, and “a decrease in real terms,” said Finance Minister Mauricio Cárdenas, noting the nation’s expected year-end inflation rate of 4.1%.
“The budget growth is below the increase of the inflation,” said Cárdenas. He added that “this is a government of austerity.”
Photo: “This is a government of austerity,” said Finance Minister Maurcio Cárdenas about a budget that is below 2017 level in real terms. (Credit: World Economic Forum)
Cárdenas stressed that a path of “intelligent austerity” remains necessary to stay in line with Colombia’s fiscal rule that governs how public finances are managed. With this budget, the Ministry of Finance projects that the key metric, the fiscal deficit, will come in a 3.1% of gross domestic product (GDP) in 2018.
This would mark another annual drop following the projected 3.6% rate in 2017. “We are passing a budget to continue reducing the fiscal deficit,” said Cárdenas.
Of the overall total, nearly half of the budget will go toward mandatory spending. Among the big-ticket items are 51.9 trillion pesos (22.5% of the budget) for debt service payments and 38.6 trillion pesos (16.4%) for personnel expenses and overhead. Another 34.3 trillion pesos (14.6%) will go toward investments.
In allocating discretionary spending, Cárdenas said that his ministry will work with Congress toward its priority of spending on initiatives related to education, electricity and gas subsidies, social inclusion, science, technology, and sports.
“This is the first of many steps in the approval of the nation’s general budget,” said Cárdenas. “Now comes the composition, which will determine whether we can make adjustments in different sectors and improve others.”
The final approved budget is in line with the objectives Cárdenas outlined earlier this year, namely maintaining fiscal discipline in order to ensure Colombia doesn’t receive a credit rating downgrade. “We will continue to reduce spending with the objective of hitting fiscal targets and reinforcing our country’s BBB rating,” Cárdenas told El Tiempo newspaper in July.