Colombian Lawmakers Propose to Slash Budget to Avoid Tax Hikes

(Bloomberg) -- A group of Colombian lawmakers submitted a proposal to slash the government’s 2025 budget to avoid the need for tax rises as Gustavo Petro’s government navigates his latest crisis.

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The proposal, led by the leader of congress Efraín Cepeda, and signed by members of congressional economic committees from the opposition and independent parties, aims to cut the budget by 12 trillion pesos ($2.9 billion), according to a document seen by Bloomberg.

Petro faced a major political crisis this week after a proposal to increase diesel prices led thousands of truck drivers to block roads across Colombia’s main cities and highways, increasing food prices and risking fuel shortages. Ultimately, the two parties reached a deal to increase diesel prices by less than half of the initial amount.

Colombia’s fiscal accounts are strained due to weak economic growth and lower-than-expected fiscal revenue. The government is projecting a budget deficit of 5.6% of gross domestic product for this year, the widest since the pandemic.

Finance Minister Ricardo Bonilla warned that tax increases would be needed to fill that gap when submitting the nation’s 2025 budget, worth 523 trillion pesos ($125 billion). However, the recent crisis puts Petro’s government in a weak position to propose additional taxes, said Angélica Lozano, a senator on the budget committee.

“I don’t see an environment for a tax reform,” she said.

The proposal will be voted on Wednesday and it will be accepted if it’s approved by any of the four economic congressional committees. Lozano said her committee currently has sufficient votes to pass it.

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