Everyone agrees: why cutting spending is a good option in the face of the fiscal crisis?

The announcement made by the Ministry of Finance to partially block some spending appropriations assigned to public entities that are financed with money from the General Budget of the Nation (PGN), which do not have budget availability certificates (CDP), is seen among economists and experts as a measure “sensible” that could send a good message of fiscal responsibility to the market, in the midst of the critical fiscal and financial situation facing the country.

(Read: Minhacienda announces cut of $20 billion from the General Budget).

However, this measure may not be sufficient given the magnitude of the problem, so other actions are required, such as approving the international debt quota in Congress, to comply with the fiscal rule.

Among the voices that defended the measure adopted by the Government is that of the former Minister of Finance, José Manuel Restrepo Abondano, who through his X account explained, according to him, the good and bad of this announcement to block spending.

(See: With partial blockade, the National Government started a spending freeze).

“Given the serious fiscal reality of Colombia (due to errors in income budgeting and excess public spending), this decision to preventively block public spending and investment is an appropriate and responsible response. Saying the above, it is still insufficient to the magnitude of the problem”Restrepo said in a message with a video in which he explained his position.

The Former Minister of Finance highlighted that the decision to freeze spending is urgent and also the only guarantee that would help present a 2024-2034 fiscal framework that is credible for rating agencies and investors.

“Not doing so is running the risk of increasing the country risk premium, more public financing costs and eventually a higher exchange rate, due to fiscal uncertainty”.

(Also: There is an increase in the price of diesel, amid new measures to contain spending).

Other experts like Anif agree on this point, saying that beyond the financial returns, it will result in the country’s image being strengthened in the eyes of risk agencies, since it sends messages of responsibility that will generate tranquility in the market, since it will protect the fiscal rule.

However, Restrepo questions the efficiency of public management that brought the country to this new reality.

Furthermore, former Minister Restrepo says that the measure is insufficient since other additional measures must be adopted, such as approving the increase in the international debt quota in Congress, within the framework of what the current fiscal rule allows, and reviewing reforms without fiscal viability ( pension) or cuts that may have political connotations, which in the future affect the country’s fiscal credibility.

(Also: They will eliminate the diesel subsidy: large consumers, the first to feel the effect).

Finally, for the experts at Anif, Although the freezing of spending marks a positive path towards the country’s fiscal recovery, sooner or later it will be necessary to review the items on which the ‘scissors’ can be passed, point at which it is not ruled out that the investment could be affected in the short and medium term.

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