The 2027 Budget is just the first step of several that must be taken in Congress for the task of putting public finances in order, which are going through a difficult time. In this interview, the Minister of Finance, Miguel Gómez Martínez, describes the stages that follow, while the first legal deadline, the approval of the budget amount, which was approved this Monday, is met.
But then a Rescue Law will come to provide incentives for economic activity, the Development Plan, and even a reform that addresses the size of the State.
What was done in the previous government regarding fiscal accounts that for President De La Espriella may constitute illegality?
We received a budget that was returned by the Congress of the Republic because it was underfunded by 30 trillion pesos. When we conducted a thorough investigation of the real conditions of the General Budget of the Nation, we found that the shortfall was much larger, that there were items totally or partially underfunded; items that were not included in the budget. What was presented to Congress was what we have called the budget of lies. What we did was put all those items that were under the table, on the table.
But is what you call the budget of lies the result of errors, negligence, or a situation that deserves going to judicial instances?
Throughout the previous government, income figures were inflated. Remember that the DIAN never met collection targets. Inflating the budget in income gives one a higher margin in spending, which was covered with debt. Since the income did not turn out as budgeted, but the expenses did, naturally there was a shortfall, and it was covered with higher levels of indebtedness. In 2024 there was a truly incredible case, they budgeted income that turned out to be 71 trillion pesos higher than it actually was. A budget naturally has a margin of error, but in the case of 2024, 71 trillion pesos are clearly not within the margin of error.
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Which bodies should be responsible for determining if there was something that is potentially irregular?
The President, when making his statement, referred to the peremptory order he has given to all ministers and all directors of national public establishments, that before the end of the month the findings found in their departments be reported, and if those findings are serious enough, they should naturally be submitted to the consideration of the control bodies and the Prosecutor’s Office. This is not only a matter for the Ministry of Finance; all national offices must comply with this order, which is to conduct a sweep of facts that seem suspicious and warrant investigation by the justice system.
The challenge is coming in Congress and the question is how will austerity management be? In an amount that grew, how will the Government enter a process of austerity, sending the signals the market is expecting?
Austerity is the only way we have, there is no other option. I use an image: it is as if you are driving a car toward a cliff. If you don’t brake, you go into the abyss. We need to brake. And not only brake: reverse. We need to give the State the capacity to be financed. As it is today, it cannot be financed. The budget we presented to Congress increases operating expenses by 2.8 percent in real terms but – also in real terms – the debt service increases by 48 percent.
A country with a level of debt like the one we have accumulated in recent years is a country that begins to find difficulties in financing its obligations. In the 2027 budget, it is planned that the State will borrow 150 trillion pesos in domestic credit: 150 trillion pesos that the State withdraws from the national economy to finance itself and, therefore, raises interest rates, penalizes investment, and creates problems with consumption. But additionally, we need 88 trillion in external credit.
The only way they will lend to us is with a coherent message of austerity, of cuts, with a firm message that the country will not continue on the path it took in the last four years.
We need 88 trillion in external credit. How will they be obtained?
Well, I am traveling to the United States on Wednesday. We have meetings with commercial banks, risk rating agencies, with a very important group of investors who are currently holders of Colombian debt, and naturally want to know the approach of this austerity policy that the Government is advancing. Additionally, we have multilateral credit sources – which are not the object of this visit -. We are more focused on commercial banks and funds, but very likely we will also have to go very soon to talk with them in Washington.
‘It will be difficult to get those resources’: Fitch on the money that the De La Espriella government seeks to finance with external debt in the 2027 budget
How to attract capital that has left?
The easy answer, the one that has us where we are, is to say that what we need is another tax reform. There have been 21 since 1991. It is like a tire to which we have put patches and patches. The tire can no longer take it. The first thing to do is austerity. The State has to stop. Second, we need to rationalize the size of the State. It is a very broad discussion, and we are not there yet.
This country grows with private investment. The State has no margin to spend; it has to be the private sector. For that, if we manage to control public spending, the interest rate will go down, and by lowering the interest rate, investments will be more attractive. If security improves, the country is viable in the medium and long term, and we will bring the capital that will allow growth. We will not get out of the fiscal crisis without growth.
But what other specific measures can be applied?
We are preparing after the budget – which we hope will be approved by Congress – what we have called a Rescue Law that will generate some tax incentives, about which I do not want to anticipate because first we have to pass the Budget. First things first. We will generate some tax incentives and, additionally, a package of spending cuts. It is the only way to make the message resonate internationally.
In which month will that Rescue Law come, Minister?
We will present it at the beginning of October, we hope to discuss it in October and November, and then comes the third phase, which is the National Development Plan. In the Plan, we will have to incorporate a series of important measures and reforms to rebalance the size of the State. I believe that in this discussion, things that many people do not know must be taken into account. The budget structure is like a sieve. There are so many entities and earmarked items that resources, like in a sieve, are lost, poorly distributed, do not generate impact, and that naturally explains why public spending is so inefficient. I will give you an example: there are 92 national establishments, there are more than 60 funds with earmarked purposes, but when you look at a budget item called “Other transfers,” you discover a terrifying thing: there are 262 laws that allocate resources to very diverse activities.
All these issues must be the subject of a comprehensive reform. And the most important issue of all, the tax structure. The country has 19 national taxes, of which four represent 95 percent of the revenue: income tax, VAT, foreign trade taxes – tariffs and external VAT – and the 4 per thousand. But we have another 15 small taxes that distract enforcement. The DIAN cannot enforce 19 taxes. They not only distract but also encourage evasion. We need to put the debate on a more efficient and simpler tax system. The only ones who make money with taxes in Colombia are tax advisors, but the rest of us lose.
How does the issue of looking at the size of the State fit into the timing of the various initiatives that would go to Congress?
To reform the State, a special law is required, it cannot be done in the National Development Plan. It cannot be this year because we do not have the time and we have other priorities. This government also started… I had been sitting in the office for 40 minutes when the earthquake happened… We have big priorities and immense challenges. Not just debt. We have to address, within the State’s capacities, the emergency we are experiencing, a serious emergency. We have to be much more creative about that. There are very interesting instruments, works for taxes. Of course, that has a fiscal impact, but the time in which the private sector does a work is much shorter than what the State can do. They are not subject to all the public contracting barriers; they are not subject to the permanent blackmail of corruption and the rules that today make public investment so inefficient. We are looking at something that seems very interesting: works for royalties.
Today, the royalty system is very inefficient. Departments and municipalities present projects that are approved by the National Planning Department, and that has become a huge bottleneck. The idea is that the departments, and hopefully we can do it, can agree on bigger projects. Today, projects are small, averaging <b4.75 billion pesos. But they must be organized in the National Development Plan because if there are no regional projects, it is very difficult to advance like this.
ANDRÉS MOMPOTES LEMOS
General Director of EL TIEMPO
Read more Economic committees of the Senate and Chamber approved the Budget amount for 2027 at $ 634.9 billion
