The president of the Fiscal Council (CF), Carlos Oliva, warned that if the Government fails to comply with the fiscal deficit rule, set for this year at 2.4% of GDP, the Ministry of Economy and Finance (MEF) would see its credibility damaged because This portfolio ensures that the established limit will be met.
“The majority of economic analysts are predicting that the deficit rule will be breached. The MEF, for its part, remains firm that it will be fulfilled, we can give it the benefit of the doubt without any problem, but there are already missing less than two months to reach the end of the year and we will see if it is fulfilled or not,” he asserted.
According to the Central Reserve Bank of Peru (BCRP), as of October 2023, the fiscal deficit accumulated in the last 12 months remained at the equivalent of 2.8% of GDP, above the permitted fiscal rule. Given this, the CF indicates that they will wait until the end of the year to issue their respective opinion.
“At the moment we are even failing to comply with the fiscal rule; although we have to wait until the end of the year to have a final opinion, the rule, which has been approved by this Congress, says that the fiscal deficit should not exceed 2.4%; However, as of October we are at 2.8%,” Oliva warned during his presentation at the session of the Working Group for the Improvement of the Parliament’s Pension System.
Evolution of the fiscal deficit. Source: BCRP
The head of the Fiscal Council argued that since 2000 Peru has not failed to comply with the authorized fiscal deficit, so they hope that this year will not be the exception, otherwise, it would be questioned whether the Government It will comply with the fiscal rule in 2024.
“If this deficit rule is breached, it would be the first time in 22 years that it has been breached., which affects the credibility of the Ministry of Economy. Although failing to comply with it by a few tenths would not cause a fiscal crisis, it would, in our opinion, damage the credibility of the MEF, because if until the last moment they are saying that the deficit will be 2.4% and it is not, On what basis could we believe that next year’s goal, which is 2%, will also be met. We would start having rules again that would not be followed and that would be a big problem for credibility,” he concluded.
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