Although it is too early to accurately estimate the Government’s cash balance at the end of this year, the figure could range between Q10 billion and Q20 billion, even if the Congress of the Republic does not approve the requested budget increase of Q14,451 million.
Everything seems to indicate that in this exercise, which is the first year of President Bernardo Arévalo’s administration, the Ministry of Finance (Minfin) will have sufficient resources, but will not be able to use all of them, since legally it does not yet have sufficient budgetary space.
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Thus, the cash balance would be explained by the tax revenues collected by the Superintendency of Tax Administration (SAT) and by the resources received from the placement of a Eurobond for US$1.4 billion, equivalent to approximately Q10.836 billion – which increased the balance of public debt by 6%.
On the other hand, as of August 1, the Integrated Government Accounting System (Sicoin) reported a budget execution of 54.27%, equivalent to Q63,419 million out of a current budget of Q116,866 million.
However, this percentage is not very different from previous years, since, for example, from July 31, 2020 to 2023 (Alejandro Giammattei administration), the budget execution was 46.1%, 46.7%, 51.1% and 55.7%, respectively. And during the Jimmy Morales government period (2016-2019), the records show spending levels of 49.5%, 48%, 51.3% and 51.2%, on the same date in those years.
“Everything indicates that the balance could be between Q10 billion and Q20 billion, with a possible fiscal deficit of 1% of the gross domestic product (GDP), since the tax collection figures are also underestimated.”
Ricardo Barrientos, CEO of Icefi
In any case, having money at the end of 2024, but because it could not be used, was one of the arguments that deputies from the opposition benches in the Finance Commission of Congress used in their presentation to request that an unfavorable opinion be issued on the request for an extension that was discussed last Wednesday, July 31.
Balance in favor
On the subject, Ricardo Barrientos, executive director of the Central American Institute for Fiscal Studies (Icefi), and independent political analyst Douglas González, agreed that without an approved extension, the resources cannot be used.
Barrientos believes that it is still premature to make a precise calculation, “but everything indicates that the balance could be between Q10 billion and Q20 billion, with a possible fiscal deficit of 1% of the gross domestic product (GDP), since the tax collection figures are also underestimated.”
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From a political perspective, González says that with the resources that will most likely remain in the treasury – some Q15 billion – plus the Q11 billion in Eurobonds, the surplus would exceed Q25 billion, “which, in a country with so many needs for infrastructure, health, education and nutrition, would be a tragedy. It seems that those who oppose the budget expansion are betting on a failure in the implementation of public policies,” he noted.
In his view, “the better the government’s ability to explain and communicate the benefits of the budget expansion for the population, the easier it would be for the public to understand the importance of Congress approving it.”
“It seems that those who oppose the budget expansion are betting on a failure in the implementation of public policies”
Douglas Gonzalez, independent political analyst
Icefi estimates that with the placement of Eurobonds on July 29, a monthly interest payment of Q57 million has already been charged, and that for the remainder of the year, only for the interest to creditors, some Q342 million will be paid.
Define priorities
Jorge Lavarreda, an analyst at the National Economic Research Center (CIEN), said that the request for a budget increase is still valid and although only the majority of the deputies of the Finance Commission voted against it, the Congress has yet to review it.
“Therefore, it is expected that next week the members of the aforementioned commission will present counterproposals and considerations on how the opinion, the amounts or the wording can be resolved, because some negotiation can still be achieved.”
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Another scenario is that if approval is achieved, it would not be as sent by the Executive. And if the outlook is ultimately unfavorable for the budget expansion, Lavarreda is of the idea that the Minfin would have to fully enter into making internal budget modifications, which the Organic Budget Law allows, “and the space left is to prioritize spending to close the second semester, with the available resources.”
“At this point, they – the Ministry of Finance – will have a much more detailed projection of what they can actually execute in the remainder of the year, so more budget modifications would be seen,” he concluded.
Minfin: The execution is normal
Asked about the levels of budget execution, the Minister of Public Finance, Jonathan Menkos Zeissig, responded that the percentage of budget execution as of July 31, 2024, stands at 54.3%, a level that is above the average observed in the last 5 years (50.2%) although slightly below what was experienced in July 2023 (55.7%).
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“Although implementation has increased in recent months in several entities, the low implementation of the Ministry of Communications, Infrastructure and Housing, as well as the Ministry of Social Development and the Ministry of Agriculture, Livestock and Food, mean that the percentage of implementation is not higher. The entities with lower implementation have been making improvements in the management of their programs and activities to ensure that the paths to corruption are closed and efficiency improvements are made to achieve results.”
He added that in the coming months an upturn in the execution of the aforementioned entities is expected, “given the seasonal behavior of public spending and the prioritization of projects by institutions.”
Country risk impact
Fredy Gómez, director of the consulting firm Cardinal and former Minfin official, explained that, if the readjustment proposed by the Executive does not advance, Guatemala’s Investment Grade rating could be jeopardized, which is based on the country’s ability to pay and does not necessarily mean that payment will be made, but rather is a warning.
The other aspect is that the margin of fulfillment of campaign promises will be reduced, so budgetary adjustments will be necessary to achieve the goals “that are not yet clear, but which have been politically stated, so the necessary adjustments will have to be made.”
Finally, he considered that there are difficulties for long-term public investment programs, with three factors and incidences:
- Long-term public investment.
- The goals of government.
- The risk of not reaching an Investment Grade rating.
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