Colombians pay little attention to the approval process of the national budget, an event that takes place every year during the same periods and guarantees the investment and spending resources for the following fiscal year.
Before June 15 of each fiscal year, the Ministry of Finance and Public Credit (MHCP hereafter), in coordination with the National Planning Department (DNP), prepares and submits to the approval of the National Council for Economic and Social Policy (CONPES) – after a review by the Superior Council of Fiscal Policy (CONFIS) and before June 15 – the draft law for the General Budget of the Nation for the following year. The national government, through the MHCP, presents to the economic commissions of the Senate of the Republic and the House of Representatives. the MFMP, which is studied and discussed with priority during the first debate of the Annual Budget Law.
The National Government, through the Minister of Finance, submits for the consideration of the Congress of the Republic the General Budget of the Nation bill, within the first ten (10) days of the ordinary sessions of that legislative body. In accordance with Article 347 of the Political Constitution of Colombia.
In a health context that has exposed the structural deficiencies of most countries worldwide, including Colombia, public hearings related to the General National Budget (PGN) bill begin this week. Amidst an uncertain scenario and an economy battered by unemployment, the strain on the healthcare system, and the improvised investments brought on by the COVID-19 pandemic, the Congress of the Republic must carefully analyze how the budget for 2021 will be structured in order to respond to the needs posed by the current crisis.
Three hundred fourteen trillion pesos (314 trillion) is the amount Colombia has available to continue its growth and recovery plan in 2021. This figure exceeds the 2020 budget by 19.21% (16% in real terms). Funds allocated to debt will be close to 76 trillion pesos, representing an annual increase of 41.61% compared to the current amount. Given this outlook, the national government must make a massive effort to secure the resources needed to meet its objectives. Under these circumstances, increasing the debt ceiling and implementing tax reform are among the possible solutions.
The National General Budget (PGN) is comprised of the total revenues of the Central National Government (GNC) and national-level Public Establishments (EP). The expenditure budget consists of operating expenses, public debt service, and investment. It is the most important financial management instrument of national fiscal policy, where public spending and its financing methods are programmed and recorded. Additionally, it establishes the rules for its execution.
In accordance with the regulations on this matter, before September 25th, the economic commissions will decide in the first debate on the approval of the project; and starting October 1st of each year, the discussion of the bill will begin in the plenary sessions of the House and Senate. Finally, before midnight on October 20th, the chambers of the Congress of the Republic must decide in the second debate on the approval of the General National Budget Law.
Structured by the National Planning Department (DNP) and approved for submission to the Senate by the Ministry of Finance, the General National Budget corresponds to the statement of motives where the amount, composition, and distribution of the presented budget are justified, as well as the economic policy decisions and macroeconomic assumptions on which it is based.
It is structured by:
The Revenue Budget, which contains the estimate of current income; of parafiscal contributions administered by a budget body, of special funds, of capital resources, and of the income of public establishments of the national order.
The Budget of Expenditures or Appropriations Law, which includes appropriations for the judicial branch, legislative branch, the Office of the Attorney General of the Nation, the Office of the Inspector General of the Nation, the Ombudsman's Office, the Office of the Comptroller General of the Republic, the National Civil Registry - which includes the National Electoral Council - the ministries, administrative departments, public institutions, and the National Police. It distinguishes between operating expenses, public debt service, and investment expenses. Investment expenses are classified into programs and subprograms.
The document through which the General National Budget is presented concludes with general provisions, which establish the rules aimed at ensuring its correct execution, and which will apply only to the corresponding fiscal year.
This will be the distribution for 2021
The total budget for 2021, excluding debt service, will remain at a level similar to that of the current fiscal year, at around 21.1% of GDP. In the words of Finance Minister Alberto Carrasquilla, the new bill “demonstrates the significant effort the administration will make to offset the projected decline in real GDP for the current year, estimated at –5.51%.”.
Of the 314 trillion pesos included in the National General Budget, 53.1 trillion are allocated to capital expenditures and 185 trillion to operating expenses. This represents an increase of 13.51% compared to the 2020 budget.
To cover debt service, appropriations totaling 75.9 trillion pesos will be included. Of this amount, 41.3 trillion (3.61% of GDP) corresponds to principal repayments and payment of obligations (court rulings, health care, and others), and 34.6 trillion to interest, fees, and other items, such as contributions to the Contingency Fund (3.11% of GDP).
According to the bill, the budget allocates the largest share to the Social Inclusion and Reconciliation segment: 25.21% of the resources earmarked for investment. This includes payments for social programs such as Familias en Acción, Jóvenes en Acción, and VAT compensation. The Transportation sector ranks second, with 9.6 trillion pesos.
In this regard, Hacienda follows with 5.37 trillion, Mines and Energy with 4.5 trillion, and Education with 3.9 trillion pesos. The Health sector would have an investment of 745 billion pesos, according to the document.
During the presentation of the bill, the national government warned of considerable growth in public debt, justified by the lack of resources generated by the pandemic. There is talk of financing through higher tax revenues and asset sales, with details on how to achieve the liquidity the country needs to continue emerging in the coming days.
In the last few hours, a group of opposition congressmen filed a letter in the economic commissions requesting that the discussion between the bill's rapporteurs be public and take place in the Capitol with live transmission. Typically, this process is accompanied by opacity, which generates a multitude of questions. On the other hand, academia has shown how in the budget approval process, the interest of some legislators in capturing specific revenues for their regions is evident. Despite constant reforms to the procedure contained in the Organic Budget Law, these debates and votes continue to be under the scrutiny of many as one of the key moments of the legislature.
The political complexity in approving budgets is gigantic. On one hand, ministers of portfolios seek resources through congress members for their policies to be successful and reach more Colombians, then there is lobbying within the executive to allocate limited resources to some ministries and not others. Additionally, ministers use their regional standing to secure more resources for one region of the country or another through regional caucuses. Finally, congress members themselves, in relation to their regional or sectoral constituents, seek to favor one sector or another with larger budget allocations, not to mention the already nonexistent indicative quotas that were so problematic in the past.
This is a costly and complex process in which the national government is engaged in constant negotiation among its own members and congressmen, in order to obtain the best and most convenient final outcome for everyone. And despite the fact that the General Budget of the Nation is the country's most important financial instrument, citizens do not show much interest in it; on the contrary, they ignore the details of what happens with the approval process and the destination of the money that comes, in large part, from taxes they themselves have paid.