Only 33.6% of the public investment budget was spent: another year of inefficiency

Between January and June of this year, public investment amounted to S/22 million 789,244, 23.6% more than that recorded in the same period in 2023, according to the Ministry of Economy and Finance (MEF). This amount represents an execution of 33.6% of the annual budget assigned.

By area, S/9,344 million was spent in the national government (33.6% of the total); while S/7,742 million (32%) was invested in local governments and S/5,357 million (35.6%) in regional governments.

For Daniel Najarro, an economic studies analyst at ComexPerú, we are entering another year in which the public investment tender is not being executed efficiently. There are six months to execute close to 70% of the budget, but, as always, it will not be possible to achieve it.

Why the failure? One of the factors is the lack of effective identification of projects. In the case of the central government, there is no clarity on which ones should be prioritized; while municipalities and regional governments suffer from a lack of training and the substantial changes to which they are subject – where their budgets often vary by up to 70% in one year, adds the specialist.

Najarro explains that Although public investment barely reaches 20% of the total investment in Peru, it is vital for the creation of infrastructure and connectivity for services provided by private companies and for closing gaps. Roads and bridges, for example.

The most recent example

In 2023, public investment exceeded S/50,000 million in execution, but the former head of the MEF Luis Miguel Castilla recalls that Dina Boluarte’s administration aggressively fudged the figures in order not to violate the fiscal rule – even so, the deficit rule was broken and a deficit of 2.8% of GDP was recorded.

This move has caused discontent among subnational governments and contributes to the causes that prevent the correct execution of budgetary items. “It was cut in a big way without any explanation and left multi-year projects that take place in two or three years without budgetary coverage. This 15 billion euro make-up was scandalous,” he told this newspaper. Castilla maintains that this event was the straw that broke the camel’s back and ended Alex Contreras’ term at the MEF.

Endemic evils

Najarro adds that apart from the lack of planning and training, corruption also limits the execution of public resources. According to data from the Comptroller’s Office, corruption cost the State more than S/24,000 million in 2023. Almost 13.4% of total spending is lost due to the perversion of the authorities.

Castilla, meanwhile, stresses that the high turnover of authorities hinders the continuity of projects and their pace of execution, as well as the controversies and technical problems that end up creating projects that are not put out to tender and are abandoned to their fate.