As of March 2024, the execution1 of the Petro Government’s investment item stood at 9.1%, according to the economic transparency portal.
• The budget execution for the first quarter of 2024 stood at 9.3%, 15.9pp below the expected execution (25%).
• If the level of execution for the same period of time is compared with previous administrations, the lowest figure corresponds to the current government.
• In addition to the Registrar’s Office (0%) and the Ministry of Equality and Equity (0%), the most lagging sectors are: Intelligence (0.1%) and the Judicial Branch (0.1%).
• Low budget execution can have consequences on the liquidity of the economy in addition to affecting key sectors for overcoming poverty.
• It is essential that the government executes the investment budget to contribute to economic recovery.
Since last year we have warned that the fiscal front is one of the most critical issues facing the economy and in which the Government plays a fundamental role, says ANIF.
He adds that in the face of lower growth, responsible government spending, contained in the General Budget, can be a way to inject resources to increase economic dynamism. However, according to the Ministry of Finance, the execution of the General Budget of the Nation in investment in 2023 closed at 71.3%, the lowest in the last decade. With this, it is essential to monitor to know the outlook for the end of the first quarter of 2024, as well as its implications for the economy.
Current situation
As of March 2024, the execution1 of the Government’s investment category stood at 9.1%, according to the economic transparency portal. Putting it in simpler terms, $100 pesos that were approved by the Congress of the Republic in the General Budget of the Nation (PGN) to be executed in the first quarter of the year on the investment front, only $37 was allocated to the payment of Government obligations which includes social programs, as well as the acquisition of non-financial assets. This means that the expected execution for the first quarter, which should be 25%, is 15.9pp below. Furthermore, if the current execution is compared with that of the same month last year (11.5%), this is 2.35pp lower. The above shows that the outlook for budget execution has worsened significantly compared to what happened in 2023.
To put the state of execution in perspective, if it is compared with the second year of government of different administrations, they have been showing a deterioration. Firstly, since the administration of Juan Manuel Santos, the first quarter of the second year of Government does not reach the expected level of execution. However, 2016 presented the highest investment execution of the last three administrations (21.3%). For its part, comparing the execution for Iván Duque’s administration during the same period, it is 9.8pp lower. In turn, the execution of the investment budget in Gustavo Petro’s administration is only 9.1%, the lowest in recent years.
Now, if you look at the investment execution of the current Government by sector, there are 22 that have a budget execution of less than 10%. In addition to the Registrar’s Office (0%) and the Ministry of Equality and Equity (0%), the most lagging sectors are: Intelligence (0.1%) and the Judicial Branch (0.1%). Added to these are the Ministries of Housing and Sports with an execution of 2.0%. On the other hand, Mines and Energy stands out with almost total execution of the budget corresponding to the first quarter of the year, which is positive if one takes into account the importance of the sector in terms of taxes and attracting foreign investment.
Implications
Although lower spending seems positive, low budget execution has negative consequences at a time of low economic growth. Low execution, on the one hand, restricts the liquidity of the economy since the Government injects fewer resources. Likewise, there are key sectors in reducing poverty, such as Education, Health, Social Protection and Labor, as well as Housing, that delay the fulfillment of their goals by not having the necessary flow.
It is worth highlighting that the low execution in a context of fiscal deficit that is set at 5.3% by 2024, provides uncertain signals. The paradox between a government that requests the legislature to approve more resources for social and investment spending, but does not execute them, shows a low capacity to manage and administer public resources.
Even though 2024 will be a year of higher growth compared to 2023, we are still below our potential growth. The decisive execution of investment resources is essential, which meets the goals proposed in the PND, promotes economic reactivation and long-term growth.