The project of the fiscal reform, if approved, would contribute with 3.7% of the Gross Domestic Product (GDP) for the State. This was estimated by the Central Bank, who issued its opinion on the initiative and determined that the main impact for the country would be in the medium and long term.
According to the Issuer, if all the provisions of the initiative are faithfully fulfilled, the reform would generate those revenues by 2022, generating an impact in the reduction of the country’s debt for the following years.
Income from income, value added tax, or from applying the fiscal rule, would be especially visible from 2020 and especially by 2022. The calculations establish that the debt of the central government would reach its peak in 2023, with 65% of GDP and from then on it would begin to fall.
If the tax reform is not approved, there will be an exponential growth of indebtedness.
The Central Bank projects that the Central Government’s deficit could reach 7.2% of GDP in 2018 and 7.5% in 2019, while the Central Government’s debt would reach 53.8% of GDP in 2018 and more than 58% in 2019. In 10 years it would exceed 100% of GDP.
On the basis of these estimates, it is concluded that the bill, as approved in the first debate on October 5th, and if its provisions are faithfully fulfilled, gradually restores the sustainability of public finances in the long run. Therefore, even from the short term, this fiscal reform can contribute to reduce interest rates and improve economic expectations, and it will also contribute to boost consumption, investment, economic growth, and job creation, strengthening the macroeconomic and financial stability of the country,”
said the Central Bank.