The Tiger Roars but Does Not Bite

Abelardo De la Espriella presented himself during the campaign as a strong man, capable of making difficult decisions that no one else was willing to make. However, when the first of those decisions came, he proved to be anything but that. Congress’s Economic Committees approved a budget of 634.9 trillion pesos. By far the largest in history, it stands a long way from the fiscal responsibility Abelardo promised during his campaign. Why is the budget so high? How is it structured? Why did Abelardo fail to keep his campaign promise?

Budgeting is always a complex process for governments. If it is too high, the country’s fiscal stability is put at risk; if it is too low, popularity suffers and social programs are weakened. It is an issue in which politicians rarely come out ahead. Regardless of how the budget is structured, there will always be sectors that criticize how resources are distributed. It is one of those situations in which the constraints of financial reality clash with the contradictory utopias of different social and political groups. Beyond that, however, Abelardo’s government faced a particular challenge: a massive debt burden at exorbitant interest rates inherited from the Petro government.

Despite this, Abelardo campaigned on a message of fiscal responsibility and stability. He acknowledged the problem and spoke of budgetary discipline and reductions in public spending. These were, in essence, uncomfortable and unpopular proposals, but necessary given the hole left by the previous government. Yet once in power, his government merely gave the problem a name. The “truth budget” does expose the previous government’s irresponsibility, but it does nothing to solve it.

Debt must be paid, and in many respects it is inflexible and difficult to replace. Around 25% of the budget will go toward debt service, roughly 155 trillion pesos. Government operating expenses and public investment, however, are areas where there is greater room for maneuver. Yet Abelardo appears unlikely to keep his promise, and budgetary discipline is nowhere to be seen. The government proposed 392 trillion pesos in operating expenditures and 87 trillion pesos in public investment—amounts that are excessive given the debt problem left behind by Gustavo Petro.

With this budget, the fiscal deficit in 2027 could reach 10% of GDP, according to estimates by the Autonomous Committee for the Fiscal Rule. This is generating both domestic and international concern. Credit-rating agencies, investors, multilateral organizations, and financial industry groups are questioning the country’s ability to continue financing the massive budget that has been presented.

Nevertheless, the government has tried to reassure the public, explaining that it wants to cut 45 trillion pesos from the budget through an economic recovery bill. This is nonsense worthy of magical realism. The government that presented the budget now says it wants to pass a bill to cut the budget it has just presented. If they really intend to cut those 45 trillion pesos, why not simply submit a 590-trillion-peso budget instead of one worth 635 trillion?

Abelardo’s government came to power promising that, regardless of the political cost, it was willing to make responsible decisions. But it appears that they concluded the electoral consequences would be too great and chose instead to continue Gustavo Petro’s policy of irresponsible spending. The new government wants to fill a hole by digging it even deeper.