Unions warn of serious risks due to the financing law

Through an extensive letter, which they are preparing to present before the Third Commission of the House of Representatives, the National Union Council will join the voices of warning about the financing bill promoted by the Ministry of Finance, to finance the Budget General of the Nation of 2025 and said that the country’s finances They will not tolerate a change of this type and, on the contrary, they should start spending less.

In the letter, known by Portafolio, they maintain that a large part of the country’s fiscal problems lie in the increase in public spending, especially operating spending, since when comparing the projected spending for 2025 with that of 2024, an increase in operating items of 6.2% is observed and they put on the table that almost 10% of that The increase will translate into personnel expenses, while public investment is reduced by 17.4%, going from $99.9 billion to $82.5 billion.

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“The National General Budget Project (PGN) for 2025 amounts to $523 billion, a nominal increase of 3.9% compared to 2024. This budget represents 29.4% of GDP, with $327.9 billion allocated to operation, $112 billion for debt service and $82.5 billion for investment,” they indicated first.

That said, the CGN remembers that for the 2024 period the Medium-Term Fiscal Framework presented the need for the National Government to adjust primary spending by $46 billion to meet the goal of the Fiscal Rule and that if what has been said is added to this recently by the Autonomous Fiscal Rule Committee, instead to spend more, the country should think about new adjustments to the budget for this year and the next.

“If the proposed adjustment in the MFMP is completed in the remainder of the year, CARF calculations estimate that primary spending would still need to be cut further to comply with the fiscal rule; and the increase in spending between 2024 and 2025 could exceed $40 billion, going from $303.9 billion in 2024 to $344.4 billion in 2025,” they added.

Income versus spending

The Union Council states in the letter that the State treasury faces important risks compared to the expectation of collection for next year and its use as a justification to increase expenses, since so far this year it has been shown that more is being spent than is earned, reaching the scenario of fiscal pressures that exist in this moment.

“If the Financing Law is not approved nor the income projected by the Dian is collected, an adjustment in PGN 2025 spending of $39.1 billion would be required to comply with the Fiscal Rule,” they note, while highlighting that “throughout Throughout the year, monthly collection has been consistently below the Government’s goal ($258.6 billion).”

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With this as background, they stated that the gap between the estimated collection and the effective collection may be related to the behavior of the economy, along with an overestimation of the expected collection, which is why they suggest reviewing first the efficiency of the tax authority, before thinking about changes that affect the economy.

“The anti-evasion, management and efficiency programs of the Dian will undoubtedly have returns in the medium and long term, when the acceleration of growth, the formalization programs of the economy and investment in the Dian contribute. However, with the PGN presented by the government for 2025, the nation is running the same risk of having to make cuts in the future,” they stated.

National Union Council

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Take care of the fiscal deficit

The Union Council is aware that the low budget execution It is an element that will help alleviate cash problems, since they could be interpreted as resources that are saved, but it also takes advantage of the letter to ask that the fiscal deficit not be underestimated, an indicator that, according to its accounts, has been in effect for more than six years. high levels.

“If the proposed financing law is approved, the deficit could be greater than $89 billion in 2025. To mitigate this risk, one option would be to review operating expenses, which present an increase of 6.2%. In particular, adjustments could be considered in transfers, which represent a 5.4% increase, or in the acquisition of goods and services, which grows by 5.7%,” he stated.

Pressing the debt and cutting investment items are two important aspects of the economy that for businessmen and industrialists have been handled lightly and without the awareness that they are the first lines that investors review when choosing a destination to rent their money.

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“It is not convenient to present a new tax reform, much less in current economic conditions. The tax reform presented in 2022 negatively impacted the economy, which is reflected, according to the results of a general equilibrium model, in a decrease of 0.1 percentage points of GDP, a gap that increases in 2024 and 2025. reaching a difference of up to 0.4 percentage points,” the letter says.

Finally, they highlight that as a consequence of the 2022 reform, The investment rate experienced a decrease between 2023 and 2025 of between 1.6 and 1.9 percentage points, a reality that in the long run becomes a brake on the wheel of growth.

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“We consider that a financing bill with a reactivation approach, it should focus on promoting private investment and investor confidence. Instead of leveraging the economic reactivation on investment as an engine of growth, the proposal seeks to do so through greater public spending, which, in the country’s current fiscal situation, can be counterproductive in the medium and long term,” they conclude. letter that will be delivered to the speakers of the bill.

Based on all of the above, the CGN presents several proposals to Congress for review, while it is expected that public hearings on the project will begin next week, which is increasingly It has less time left to be approved, while tension within the Government increases.