El Ciudadano
Original article: «El proyecto presenta déficit, al menos hasta 2031, incluso considerando el efecto en crecimiento»: Consejo Fiscal Autónomo sobre megarreforma de Kast
In a recent session of the Senate Finance Committee, where the so-called «national reconstruction project» promoted by the Kast Administration is being discussed, Paula Benavides, president of the Independent Fiscal Council (CFA), reiterated the entity’s critical stance on this initiative, warning that it presents a deficit at least until 2031.
«We once again appreciate that the project includes measures aimed at boosting economic growth and is complemented by efforts to adjust spending. However, as we have pointed out, the project presents a deficit at least until 2031, even considering the growth effect,» stated Paula Benavides.
She noted that they have also identified various risks that could exacerbate the deficit: «The project commits to fiscal spending with high certainty in the short term while reducing permanent revenues, whereas the positive effects depend on future revenues, which are more uncertain and tied to growth.»
«This could lead to a greater deterioration of the fiscal balance if the expected magnitude and speed do not materialize,» affirmed the CFA president.
Regarding the uncertainty factor embedded in Kast’s initiative, which relies on economic growth, Paula Benavides explained that it involves an asymmetric uncertainty where costs are more certain and predictable while benefits are uncertain, gradual, and conditional.
«We see a cross-cutting risk in the project due to the misalignment between fiscal costs and benefits. The fiscal costs or reduced revenues are observed from the first year of the law’s enactment; meanwhile, the dynamic growth benefits gradually materialize, with greater uncertainty regarding when they would occur, at what speed, and to what extent. All this signifies a risk for public finances that could be additional to the already estimated deterioration,» argued the CFA president.
«The cost of overestimating dynamic revenues—greater deficit, debt, and risk to fiscal sustainability—exceeds the cost of underestimating them. It’s not the same which direction we err,» Benavides indicated, emphasizing that «the adjustments that have been announced to the project are insufficient to correct the fiscal deterioration and to advance fiscal convergence simultaneously.»
«We recommend that the project move towards fiscal neutrality to account for reduced revenues. Additional compensatory measures for income and spending can be considered, for example, through changes in gradual implementation, cost limits, and monitoring schemes,» the expert pointed out. Watch the full CFA presentation below (YouTube Senate):
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