Colombia Cuts 2024 Budget by 5.6% Amid Growing Fiscal Concerns
(Bloomberg) -- Colombia’s government said it would cut the 2024 budget by 5.6% in an effort to comply with spending limits amid lower-than-expected tax revenue.
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President Gustavo Petro’s administration announced it was slashing spending this year by 28.4 trillion pesos, or $6.4 billion, due to a drop in tax revenue. In a statement, the Finance Ministry said the move represented the government’s commitment to spending limits, know as the fiscal rule, which is estimated to reach 5.6% of gross domestic product this year.
The cut is below a previously considered reduction of 33 trillion pesos and includes a 20 trillion cut announced in June. Flooding in several areas of the country prevented higher reductions, the ministry said.
“It could be that a smaller cut generates some noise, but even so, this one is sufficient to comply with the fiscal target,” Alejandro Arreaza, an economist at Barclays, said by email.
Colombia’s dollar bonds rose to session highs following the news, with notes maturing in 2053 trading at the highest levels in a month. The Colombian peso reversed losses.
Fiscal concerns have been at the top of creditors’ minds ever since Petro failed to reach an agreement with legislators over the country’s 2025 budget in September. Lower-than-expected tax revenue and mounting spending needs are putting pressure on the government’s accounts.
A new bill that increases money transfers to the regions is currently making its way through Congress, creating further uncertainty over the country’s fiscal sustainability.
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