Guatemala's public finances face a tough scenario for 2010, after Congress rejected a proposed larger budget.
Wednesday, December 2, 2009
In 2010, a politically weakened Guatemalan Government will be obliged to find financing to cover an expected $770 million fiscal deficit.
It will be tough to achieve such goal without compromising the country's macroeconomic balance and sovereign debt ratings, so there will probably be important cuts in public spending.
Nicholas Virzi, from the Rafael Landívar University, considers that "the government lost credibility before international financial institutions when the budget was not passed ... this will make it tougher to approve higher taxes, issue bonds or negotiate loans to cover the deficit".
Experts agree Alvaro Colom’s successor will face a difficult fiscal, economic and political situation.
First, it will be difficult to achieve the tax reform needed to tackle the decline in tax revenues which is set to continue into 2012. Ricardo Barrientos, Central Institute for Fiscal Studies (ICEFI in Spanish), also said that the losing candidate in the election will become the main opposition, and will complicate any reform attempts or approval of additional financing for the state.
The budget approved by the council of ministers represents a 10% increase relative to 2010.
The document sets the country's 2011 budget at $7.039 billion of which 56.8% will be managed by the central government with the remaining 43.2% administered by decentralized institutions.
The $13 billion budget presented to the General Assembly is almost $2.5 billion more than in 2010.
The article in Laestrella.com.pa reports that Panama's Minister for Economy and Finance, Alberto Vallarino, commented that, "of the $13 billion state budget, almost $6 billion (46% of the total) will go towards social welfare projects including the National Development Convention and fund sectors such as health, education, housing, transport, tourism as well as small and medium sized businesses".
For each Lempira spent in 2010, the Government needs 22 cents from international aid.
"Expenses for 2010 sum $3.59 billion, which will be financed ... with tax revenue..., internal credit and $597.9 million from international aid", reported Elheraldo.hn.
The upcoming administration, headed by president-elect Porfirio Lobo, is worried by international organizations freezing credit to the country in light of the political incidents of June 28.
español
6931
