2002 budget goes to Congress.  On 27 July, the government delivered its US$ 25.4 billion 2002 budget to the legislature.  The government plans to increase the central government’s nominal spending by 5.6% over this year.  Higher interest and amortization costs are anticipated to account for the lion share of spending growth, expanding 12.0% and 4.6% respectively.  Operational spending is set to increase by 5.5% nominally, while public investment is slated to decline in nominal terms by 0.1%.  The government is confident that the recent tax reform measures will help boost revenue inflows and that the new ‘Fiscal Responsibility’ law (see LatinFocus Consensus Forecast July 2001) will enable the government to remain on target with spending next year.  As a result, the 2002 budget is expected to be within the 1.8% of GDP fiscal deficit target agreed to with the International Monetary Fund (IMF) for next year.  Congress has to approve the budget by 20 October.

Improved tax collection bolsters fiscal accounts.  The National Tax and Customs Department (DIAN) reported that tax receipts rose 34.3% nominally in the first half compared to the same period last year.  According to DIAN, the key behind the improvement in the tax take was not only the pick up in economic activity but also the success of the government’s crackdown on tax evasion.  Tax revenue inflows of 13.1 trillion pesos (US$ 5.9 billion) came in just above the government’s target of 12.9 trillion pesos (US$ 5.8 billion).  Both the 0.3% financial transactions tax and the increase in the value added tax to 16% served to boost fiscal income.  The government remains optimistic that improved tax collection will help meet the 2.8% of GDP fiscal deficit target agreed to with the IMF.  The optimism is not shared by Consensus Forecast panellists, who expect lower economic activity to affect tax inflows and prompt an overshooting of fiscal deficit target.  Furthermore, Consensus Forecast data indicate that the government is also likely to overshoot the 2002 fiscal deficit target.  In fact, pressures to step up public spending may mount in the run-up to the presidential and congressional elections scheduled for June next year.

Note:  The above text is an abridged version of the LatinFocus Consensus Forecast briefing on Colombia.  For more details please click here.

For five-year forecasts, please click here.