The document includes a report on the macroeconomic and fiscal results for 2022, the updated Financial Plan for 2023 and 2024, and the medium-term macroeconomic and fiscal strategy, with the primary surplus goals that the administration intends to achieve in line with the objective of public debt sustainability.
The Medium-Term Fiscal Framework is aligned with the objective of the national Government to advance the social and economic transformation of the country through a set of policies and structural measures based on what is established in the National Development Plan (PND): Colombia, world power of life.
This change contemplates a productive transformation and a broad agenda of economic and social reforms, which includes the Tax Reform for Equality and Social Justice, and the pension reforms “Change for Old Age”, labor “Work for Change” and the Reform Structural to the Health System, which will make it possible to settle the historical debt with Colombian society within the framework of macroeconomic stability and the sustainability of public finances, fully complying with the Fiscal Rule.
“The high growth of the economy in 2022, which allowed significant progress in terms of unemployment and multidimensional poverty, would slow down throughout 2023 and 2024 before converging to its medium-term trend above 3%,” said the Minister .
In addition, he highlighted that the short-term fiscal strategy of this administration in response to these challenges closely follows four principles: i) the need to finance social and economic reforms and programs to achieve greater social justice; ii) the sustainability of debt and public finances; iii) strict compliance with the fiscal rule; and iv) the preservation of macroeconomic stability.
Thus, a reduction in the fiscal deficit of 1 percentage points of GDP is projected in 2023 (4.3% compared to 5.3% in 2022). This adjustment would allow a primary balance for the first time since 2019, leveraged on the higher tax collection from the tax reforms of the last two years and the high oil prices, which would lead to historically high revenues.
In 2024, a slight increase in the fiscal deficit is expected to 4.5% of GDP. Although an increase in the deficit is expected compared to 2023, this is due to current debt service payments and a higher interest expense that would result from the greater financing needs of 2023 and 2024 and projected market conditions, maintaining thus the primary equilibrium.
Thanks to the Government’s strategy in relation to fuel prices, the deficit of the Fuel Price Stabilization Fund (FEPC) would be close to 0 in 2024, definitively resolving the challenge that this fund has represented for years for tax stability. Fiscal resources would be released that could be used to finance other social programs more aligned with the objectives of greater social and environmental justice.
For the medium term, economic growth is projected to recover towards its long-term trend (3.2%).
The Government would maintain a strategy of primary surpluses that would simultaneously allow the debt to converge at its anchor level towards the end of the horizon of this Framework and the stabilization of the economy’s external liabilities to be achieved.
Inflation would converge to the target range in 2025 and the current account deficit would reach 2.5% in 2034, allowing the stabilization of net external liabilities.
The productive transformation, which includes the reindustrialization policy and the energy transition, would be both the engines of growth and of external adjustment in the medium term.
The national government thus reaffirms its commitment to the objectives established in the PND, prioritizing social policy and the requirements imposed by the fiscal rule and responsibility in the administration of public finances. This commitment will continue to serve as the basis for the design of the fiscal strategy. with RSF