The doubts generated by the budget cut regarding the payment of the Fepc debt

Through the Decree 0766 of June 20, 2024, the Ministry of Finance made official the postponement of appropriations from the General Budget of the Nation (PGN). The figure for the budget cut for this year’s fiscal period was set at 20 billion pesos.

(Read more: Minhacienda, Mintrabajo, Dian and ANI account for 70% of the cut to the 2024 National Budget)

According to what was explained by the portfolio, this regulation guarantees compliance with the Fiscal Rule, in line with the Updated financial plan in the Medium-Term Fiscal Framework 2024 (MFMP). Furthermore, the message of tranquility and responsibility that was sent to the markets in mid-June is ratified.

After the issuance of the decree, several voices spoke out regarding the measure. These include that of Oliver Pardo, director of the Fiscal Observatory of the Javeriana University, who through a thread on his X account raised some concerns regarding what the text indicates.

According to Pardo, when looking at the details of the budget cut decree, a category called ‘other transfers – distribution prior to dgpnn concept’ is observed. In this area, 8.2 billion pesos are found of the total amount of 20 billion.

The expert mentions that, to discern what this transfer is about, it is necessary to refer to several documents, including the MFMP of 2024, which details that the deficit in 2023 of the Fuel Price Stabilization Fund (Fepc) was $20.5 billion.

“An important detail is that, although those $20.5 billion were incurred in 2023, they are accounted for in the PGN 2024. In what category of the PGN are they? In ‘other transfers – distribution prior dgpnn concept'”he highlights.

(Read more: The orphan points left by the cut in the General Budget of the Nation)

(More news: The position of the Minhacienda: ‘It is not true that the Colombian economy is going badly’)

Pardo indicates that in the liquidation decree issued at the beginning of this year to that category
correspond to $22.2 billionin other words, almost the entire Fepc deficit.

It is in this context that several concerns arise, including “Where are they going to make a cut of $8.2 billion to an item of $22.2 billion of which $20.5 billion was already caused? What does this cut of 8.2 billion really correspond to? Does it really exist? Is the Fepc going to stop being paid? Are accounts being crossed with Ecopetrol? Or what figure will be used to pay the Fepc that is not accounted for in the budget?

The expert also highlights that there is no clarity regarding what is mentioned in the MFMP and the estimated payment from the Fund. “What do they mean in the MFMP when they say that the FEPC will be paid with “the tools permitted by law”? What are those tools that allow 8.2 billion to disappear from the PGN without there being a real spending cut? “, he adds.

The director of the Javeriana Fiscal Observatory also emphasizes the need for these doubts to be resolved by the Ministry of Finance and thus maintain fiscal transparency.

(See: Medium-Term Fiscal Framework: cuts and collections must be a priority for the rest of 2024)

Within the framework of the Andesco Congress, the Minister of Finance, Ricardo Bonilla, announced that in the coming days $5.1 billion will be paid for the debt generated by the Fepc in the third quarter of 2023.

According to the head of the Treasury portfolio, the payment of this amount will be made with resources from the issuance of debt through treasury bonds (TES). As for the two remaining payments, these will be made under the same mechanism.

It is worth highlighting that the first payment made this year used money from the Nation’s treasury, for about $7.8 billion.

(More context: Treasury will pay $5.1 billion in fuel subsidies by issuing debt)

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