Presentación Presupuesto General de la Nación 2024

2024 Budget Presentation Overview

Introduction to the Budget Proposal

• The presentation begins with an introduction by senators representing the third and fourth commissions, focusing on the official budget proposal for 2024.

• Key topics include proposed changes, general criteria, income, and expenses related to the national budget.

Components of the National Budget

• The national budget consists of three main components: operational costs, debt service, and investment.

• The proposed budget for 2024 is set at 502.6 trillion pesos, balanced between income and expenditures.

Principles Underlying the Budget

• Emphasis is placed on establishing principles that guide budget construction, particularly prioritizing tax revenues over debt financing.

• The goal is to ensure sustainable funding through reliable tax sources rather than increasing national debt.

Fiscal Balance Objectives

• Central objectives include maintaining a primary balance in government finances while ensuring fiscal equilibrium.

• A zero primary balance was achieved in 2023; this serves as a benchmark for future fiscal planning.

Investment Projects and Social Transformation

• All investment projects must align with specific goals outlined in legislation aimed at social transformation (Law 2194).

• Discussion includes historical debts not classified as traditional debt but still requiring state obligations.

Macroeconomic Assumptions for 2024

• Key macroeconomic assumptions include controlling inflation rates projected to decrease from 11.7% to around 5.7% by year-end 2024.

• Adjustments in fuel prices are anticipated; closing gaps in price stabilization will take until 2025.

Economic Forecast and Policy Insights

Macroeconomic Projections for 2024

• The projected exchange rate for 2024 is set at 4,603 pesos, with an expected effective devaluation of 9% this year and a revaluation of 0.8% next year.

• The nominal GDP (PIN) is forecasted to be 1,065 trillion pesos for 2023, increasing to 1,695 trillion pesos in 2024, reflecting a nominal growth of 9.8% this year and a lower inflation rate of 5.6% next year.

• Real growth rates are anticipated at 1.7% for the first half of the year; however, there was a slowdown in the second quarter with only a growth of 0.3%.

Monetary Policy Adjustments

• The central bank's goal to cool down the economy has been achieved; thus, further increases in intervention rates may no longer be necessary.

• There is an emphasis on transitioning from cooling measures to stimulating economic recovery by lowering interest rates starting September and October.

Oil Production and Pricing Outlook

• Oil prices are estimated at $78 per barrel for this year, declining to $74 per barrel in 2024; production is expected to average around 768,000 barrels daily this year.

• Approximately half a million barrels are exported while about 280,000 barrels are processed domestically.

Trade Balance and Current Account Deficit

• Imports are projected at approximately $60 billion this year and slightly higher in the following year due to stabilizing exchange rates affecting market supply expectations.

• The current account deficit is expected to improve from -6.2% last year to -4%, aiming towards a long-term target below -3%.

Fiscal Discipline and Spending Priorities

• Emphasis on social spending aligns with constitutional mandates while adhering to fiscal austerity measures aimed at maintaining public finance sustainability.

• Coordination among various funding sources (national budget, royalties system, local governments) is crucial for efficient investment execution without duplicating efforts.

Investment Efficiency Focus

• A commitment exists towards improving investment expenditure efficiency rather than merely increasing spending levels; ensuring that projects do not become "white elephants."

• Review processes will be implemented for investment expenditures to guarantee accountability and effectiveness before committing additional resources.

Budget Overview and Key Inflexibilities

Salary Increases and Transfer Regulations

• The budget includes a salary increase of IPC plus 9.2%, with an expected IPC of 1.6% already negotiated, marking the maximum allowable increases for salaries.

• Transfers are mandated by law, which also dictates their amounts and disbursement schedules, leading to significant inflexibility in budget organization.

• Increased tax revenues automatically enhance resources for the general participation system, affecting transfer dynamics.

Financial Assets and Debt Service

• Financial assets are acquired based on liquidity support from entities, while liabilities decrease according to existing supports.

• Debt service represents another major inflexibility due to fixed repayment profiles and interest commitments that restrict budget flexibility.

• Significant debt repayments are scheduled for 2024 and 2025, particularly concerning obligations to the International Monetary Fund (IMF), which cannot be renegotiated.

Investment Programming Criteria

• Investment programming faces three main inflexibilities: transfers from the general participation system, debt service obligations, and specific allocations from corporate income tax increases established by tax reforms since 2012.

• Specific allocations mean that as corporate income tax revenue rises, certain entities receive increased funding compared to others.

Budget Distribution Insights

• The proposed budget for 2024 totals 52 trillion pesos, representing approximately 29.6% of GDP.

• The operational budget is set at approximately 476 billion pesos or about 28.1% of GDP; further breakdown includes current revenues and capital resources.

Overview of the National Budget and Revenue Sources

Key Insights on Revenue Allocation

• The national budget amounts to three trillion pesos, primarily funded by current revenues, which are 99% derived from tax revenues. This creates inflexibility in the general participation system.

• Expenditure is categorized into operational costs (310 billion pesos), debt service (94 billion pesos), and investment (approximately 98 billion pesos). This distribution will be examined further in detail.

• For 2024, total resources include 317 billion pesos in capital resources, with special funds at 141 million (28%) and parafiscal rents at 3 billion (0.6%).

Breakdown of Tax Revenues

• Current revenue sources show a stark contrast between tax revenues (275 billion pesos from domestic taxes and 40 billion from international taxes) versus non-tax revenues, which only account for about 1.5 billion pesos.

• Capital resources involve green bond processes; debt concentrated in years 2024 and 2025 aims to ensure manageable short-term payments while allowing space for investments.

Debt Management Strategies

Payment Plans for Upcoming Fiscal Year

• In 2024, the plan includes paying off a debt of approximately 95 billion pesos, reflecting an increase compared to previous years.

• The Ministry of Finance has already disbursed around 70% of the debt due for the year 2023, ensuring no immediate concerns regarding its payment.

Long-Term Debt Strategy

• A graphical representation indicates potential rollover amounts that can be transferred to long-term debts while meeting commitments for the year ahead.

Comparative Analysis of Income and Expenditures

Year-on-Year Changes

• There is a notable increase in current income by 15.2%, with capital income rising by only about 30%. Special funds have increased by approximately 21%.

Expenditure Distribution

• Total expenditures are divided into three main categories: operational expenses (310 billion), debt service (94.5 billion), and investment spending (98 billion).

Detailed Examination of Operational Costs

Components of Operational Spending

• Operational costs encompass personnel expenses, goods/services acquisition, current/capital transfers, financial asset purchases, liability reductions, and tax-related expenses totaling around 310 million pesos.

Growth Metrics

• The operational budget reflects a significant increase of about 19% compared to the previous year and constitutes roughly 18.3% of GDP.

Implications on Debt Service Payments

Financial Commitments Overview

• Total planned payments for amortizations and interest amount to approximately 95 billion pesos—an increase of about 20.4% over last year's debt service payments.

International Obligations

Budget Overview and Investment Insights

Importance of Debt Service and Investment Space

• The government emphasizes the need to balance debt service with investment opportunities, aiming to secure space for future investments.

• Proposed investment is set at 98 million (19.4% of the budget), reflecting a 17.4% increase, while debt service grows by 20.4%, indicating a focus on managing financial obligations.

Budget Distribution by Sector

• The budget is organized by sectors rather than programs, highlighting how funds are allocated across different areas.

• Education receives the largest budget allocation, increasing from 57 million to 70 billion; health follows with an increase from 52 billion to 61 billion.

Debt Service Allocation

• Debt service distribution primarily focuses on national public debt managed by the Ministry of Finance, with significant allocations totaling 94.5 billion for debt payments.

• Most resources (92.4 billion) are concentrated under the management of the Public Credit Directorate within the Ministry of Finance.

Sectoral Resource Allocation Trends

• A graphical representation illustrates sectoral funding trends over recent years, showing education as receiving substantial increases in budgetary support.

• Notable increases in funding for defense and police are also observed, alongside gradual reductions in certain allocations like those for finance.

Functioning vs. Investment Budget Distribution

• The finance sector's allocation is expected to decrease gradually as it shifts responsibilities directly to entities rather than maintaining large discretionary funds.

• Small sectors collectively see an increase from 23.7 billion to 26.7 billion, indicating a broader distribution strategy across various sectors.

Final Thoughts on Investment Spending

• The investment budget reflects strategic priorities focused on building infrastructure and enhancing capabilities rather than merely supporting operational costs.

• There’s a clear distinction between functioning budgets and investment budgets; not all sectors that receive high operational funding necessarily get equal investment support.

Investment in Public Sectors

Overview of Investment Allocation

• The transportation sector receives a significant increase in investment, rising from 11.2 trillion to 13.6 trillion pesos.

• Social inclusion and reconciliation follow, with funding for citizen rent payments increasing from 8.2 trillion to 12.7 trillion pesos, highlighting a shift in transfer strategies due to the pandemic.

Agricultural Investment and Reforms

• The Ministry of Equality is allocated a budget of 9.7 billion pesos, while education sees an investment of 8.5 billion pesos.

• Agriculture receives unprecedented funding aimed at transforming it into agro-industry through tax reforms and productive projects.

Land Reform Commitment

• The government commits to fulfilling Chapter One of the Havana Agreement by transferring three million hectares for agrarian reform within a twelve-year timeframe; only less than 50,000 hectares have been transferred so far.

• Plans are set to acquire fertile land not currently used for agriculture, aiming to expand agricultural land from seven million hectares towards ten million.

Goals for Agricultural Development

• The target is to acquire approximately 500,000 hectares annually over the next seven years as part of the agreement's fulfillment.

• In 2023, the Ministry of Agriculture received an allocation of 4.4 trillion pesos which will increase to 8.2 trillion in 2024 for land purchases and productive projects.

Energy Transition and Housing Sector Synergy

• The Ministry of Mines and Energy's budget increases from 7.2 billion to eight million pesos as part of energy transition efforts.

• A critical observation is made regarding housing subsidies: while the Ministry provides them, private builders construct homes; thus collaboration among public spending, finance sectors, and builders is essential.

Infrastructure Development Collaboration

• Similar synergies are required between the transport ministry and financial sectors for infrastructure development; transport designs projects but does not build them directly.

• This collaborative approach aims at economic recovery through effective resource allocation across various sectors.

Budgetary Constraints on Investment

• There’s a noted reduction in investment resources managed by the Treasury Department from ten point two billion down to four point eight billion due to strategic reallocations.

Investment Growth and Government Budgeting

Importance of Investment in Development Plans

• The significance of leveraging investment has been recognized, as it is essential for effectively executing government development plans and programs.

• In the last year of the previous administration, an investment budget of 69.6 billion pesos was approved, but only 62.7 billion was anticipated for the new government's budget in 2023.

Adjustments to Investment Resources

• The current government undertook a review of investment resources, leading to significant adjustments in the 2023 budget.

• The total adjustment included an additional 11.4 billion from December 2022 and another 9 billion from subsequent budget revisions, resulting in a final budget allocation of 83.2 billion pesos.

Future Projections and Legislative Support

• A proposal to increase the investment budget from 83.2 billion to 97.7 billion pesos was made, emphasizing the need for legislative support to sustain this effort.