The payment of interest on debt service (both internal and external) represents 66% of the fiscal deficit, informed the Ministry of Finance, based on the fiscal figures cut to July.
The longer the adjustment is delayed, the more resources we will have to devote to interest payments. This factor, coupled with the high rigidity of spending, prevents further allocation to other important programs for the development of the country, such as the construction of public works, and this is seen in July, when there is a slowdown in spending because we have less investment in capital expenditure,”
said Rocío Aguilar, Minister of Finance.
As of July 2018, the Central Government’s fiscal deficit was 3.3% of the Gross Domestic Product (GDP), the highest of the last six years.
Although for this period the expenditure figures show a decrease compared to the same period in 2017, this is not reflected in the financial deficit, because tax revenues have a slower growth rate than that observed in 2017.
In terms of income, there is a slow growth. While as of July 2017 tax revenues increased 5.6%, to July 2018 they increased to 2.4%.
The main factors that explain this behavior are:
1. The low growth in credit or debit card holdings,
2. The decrease in the profits of the financial sector,
3. The end of the effect of the Banking for Development Law on the tax on remittances abroad,
4. The low import of vehicles,
5. The increase in the use of tax credits and
6. The disconnection between economic growth and tax collection.