Colombia needs $12.7 billion budget cut to meet fiscal target, committee says

By Nelson Bocanegra

BOGOTA (Reuters) - Colombia needs to cut budget spending by 56 trillion pesos ($12.7 billion) to comply with its fiscal rule this year, an independent committee of experts said on Tuesday, a much higher figure than is being discussed publicly by officials.

Colombia's government has already announced a 20 trillion peso spending cut and Finance Minister Ricardo Bonilla said last week it could increase that to 33 trillion pesos.

The cut recommended by the Autonomous Fiscal Rule Committee (CARF) would be equivalent to 3.2% of gross domestic product, the report said, and was needed because tax collection is running below government projections.

The Andean country may also require a budget trim of 39 trillion pesos in 2025, the committee added.

The government's fiscal rule, created in 2011, imposes policy constraints meant to ensure the sustainability of public finances.

"The finance plan for 2025 should reflect realistic goals for structural income that finances structural costs," the committee said in its report.

"Going forward the country must identify and take structural measures that allow the consolidation of a sustained fiscal adjustment and ensure fiscal sustainability."

The CARF warned in July that the country could need additional adjustments to comply with the fiscal rule in 2024 and 2025.

Economic committees in Congress have rejected the government's proposed budget for 2025, meaning the government would need to push it through by decree.

The government also hopes to push a 12 trillion tax reform through Congress to finance 2025 budget needs, but it has made slow progress.

The finance ministry has set a fiscal deficit goal of 5.6% of GDP for 2024 and 5.1% of GDP for 2025.

($1 = 4,400.69 Colombian pesos)

(Reporting by Nelson Bocanegra; Writing by Julia Symmes Cobb; Editing by Christina Fincher)