Colombia’s congress is studying the government’s 2021 budget proposal, which seeks to step up public spending to push the economic recovery of the COVID-19 crisis.
According to Finance Minister Alberto Carrasquilla, he wants to increase the government budget by 13.4% to 314 trillion pesos ($84.3 billion) by dramatically increasing the country’s debt.
Carrasquilla wants to finance the increased budget with a 41% increase in public debt that would go from COP53.6 trillion ($14.4 billion) this year to COP75.8 trillion ($20.4 billion) in 2021.
Colombia’s 2012 budget proposal
Source: Finance Ministry
With oil revenue in a state of collapse and a drop of tax revenue as a consequence of the pandemic, the finance minister saw no other option but to dramatically increase debt to compensate the major drop in revenue.
According to economic news website Dinero, Carrasquilla additionally hopes to obtain revenue from privatizing government assets, which is likely to cause a heated debate in Congress.
The finance minister also wants to recover tax revenue, but didn’t immediately specify how.
Carrasquilla wants Congress to approve the budget that calculates it needs 185 trillion pesos ($49.7 billion) on cost and increase public investment by 23.1% to 53.1 trillion pesos ($14.3 billion).
Part of the investment, COP4.3 trillion (1.2 billon) will be dedicated to the Economic Reactivation Plan, the government is expected to specify within weeks.
The public investment priorities of the administration of President Ivan Duque would be in infrastructure, housing, technology, new energy, digital transformation and creative industries, according to Colombian news agency Colprensa.
Finance Minister Alberto Carrasquilla
Duque said earlier this week that part of his government’s plan to accelerate economic recovery from the biggest crash in history is to accelerate the execution of public infrastructure projects.
Carrasquilla stressed that any recovery after the projected 7.8% drop in the country’s GDP this year will require major participation of the private sector.
Finance Minister Alberto Carrasquilla
The budget is likely to be subject to fierce debate in Congress, particularly in regards to poverty reduction, which is projected to skyrocket by the United Nations’ Economic Commission for Latin America and the Caribbean (ECLAC).
In its latest report, ECLAC said it expected that the number of people in extreme poverty, which means living off less than $1.25 a day in Colombia will increase 40% to 7 million, 14% of the country’s population.
To mitigate the effects of this massive increase in extreme poverty, Congress has asked the government to implement an Emergency Basic Income, but this has been rejected by Carrasquilla.