The fiscal risks that the reforms would imply, according to the CARF

health reform

In mid-June, the Ministry of Finance presented the 2023 Medium-Term Fiscal Framework (MFMP), a report with which the Government seeks to set the fiscal and economic scenario of the Nation for the next 10 years.

With this document, in addition to updating its macroeconomic projections, the Executive proposes what will be the economic measures that will be adopted to promote the well-being of the population and the growth of the economy.

(Read more: What you need to know to understand the Medium-Term Fiscal Framework)

In this regard, the Autonomous Committee of the Fiscal Rule (CARF) issued some recommendations and warnings in relation to the fiscal objectives that are set out in the MFMP on several fronts, highlighting within his observations the possible non-compliances that could be presented before the advance of the social reforms.

One of the points developed in the most recent report on the Medium-Term Fiscal Framework is what the Government’s roadmap will be in economic and social matters, mainly addressing the Executive’s reform agenda.

In that sense, The committee of experts points out that the MFMP does not show in the fiscal programming the probable additional expenses that would result from these proposals. In particular, those that would derive from the health and pension reform.

CARF estimates that, in the short term, these reform projects may represent a greater need for annual spending of more than 0.7% of GDP. It also highlights that the document does not establish what the strategy will be to finance them in compliance with the fiscal rule.

(More context: ‘Tighten your belt’, called on the Government to comply with the fiscal rule)

Health reform.


The foregoing would be linked to the fact that, by not having any margin, The additional spending that these projects represent would not have fiscal space within the path proposed by the Executive. Therefore, the approval of these initiatives would require the search for new sources of structural income.

When reviewing the data in more detail, regarding the health proposal, experts estimate that “the costs that are measurable and that would be additional to the resources contained in the MFMP, which would derive from the implementation of the health reform would amount to 6.7 trillion pesos, on average, per year”. What represents a 0.4% of additional GDP in the inflexible annual expenditures.

(See: The effects of the price of the dollar on the fiscal rule)

Regarding the pension project, according to CARF estimates, the annual outlays would be close to 5 trillion pesos, 0.3% of GDP. This considering the resources that would be derived for the implementation of the semi-contributive pillar and the solidarity pillar.

pension reform

pension reform

Jhon Jairo Bonilla / Archive EL TIEMPO

(More news: These are the assumptions with which the Treasury is doing accounts)

In general terms, the committee stresses the importance of limiting spending to meet the objectives of the Medium-Term Fiscal Framework.

In addition, it calls for the 2024 General Budget of the Nation to be programmed with a spending ceiling that ensures compliance with the fiscal rule, based on the Nation’s structural income.


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Written by Editor TLN

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