Reflections on the National Budget of Colombia for 2.024.

The General Budget of the Nation for 502.6 billion (b) pesos for the year 2.024 is mainly composed of 94.5b for debt service and the rest 408.1b are distributed between operation 310.3b and investment 97.7b which together are directed mainly to 70.5b for education, 61.5b for health, 55.2b for defense, 50b for finance and 46b for work. Other destinations are equality and equity 11b, social inclusion 15.1b within which social prosperity is located with 10.7b that addresses social programs such as families in action, youth in action, Greater Colombia, housing improvements and citizen income. Also with lower amounts are Congress of the Republic 1.1b, Presidency of the Republic 2.4b, judicial branch 9.7b, prosecutor's office7b, housing 9.6b, culture 1.5b and sports and recreation 1.3b.

The principal, which is the debt service of 95b, is decomposed into external 43b and internal 51b and in another way contains the interest component of 55b and the principal 37b.

Of the operating expenses mentioned above for 310.3b that are distributed in education, health, defense, etc., 55b of personnel expenses and 236b of current transfers stand out, which are 70.5b of the general participation system (which are intended to meet expenses in education , health, drinking water and basic sanitation in the territories) 57.4b retirement, 35.3b health insurance (programmed according to current legal mandates) 15b fuel price stabilization fund and teachers' retirement fund 15.5b mainly.

The previously budgeted pensions correspond to 25b for Colpensiones, 16b for defense and police and 12b for the teaching profession.

Those personnel expenses mentioned 55b correspond to those provided directly by the national budget because there are others that are provided through current transfers.

In fact, the payroll and direct Budget charges are 55b corresponding to 677.748 positions and the personnel who are remunerated from national transfers are 461.181, worth 40b. In the first are the defense and police personnel who total 496.344 members with a payroll of 25b and in the second are those of the teaching profession 356.248 people for 33b.

When adding the officials paid directly by the Budget and those paid through transfers, it results that the payroll of officials linked to the Public Administration is 1.138.929 people with a value of 95b.

Regarding the social prosperity resources 10.7b that go to the social programs mentioned above, they are minor allocations within the National Budget that are directed at low incomes.

All the above Budget expenses are supported by Budget income made up of the sum of current income 317.4b, capital resources 141.1b and other funds and public establishments for 44.1b which add up to a total income of 502.6b.

Current income is what Dian collects and within the capital resources are internal credit 46.3b, external credit 27.4b and other income 29.5b. In current income, income tax 162b stands out, followed by internal and external value added tax 116b. Others such as tax on financial movements 15b and wealth tax 2b.

The 2.024 Budget was prepared considering some estimated parameters for that year such as the following. Inflation 5.7%, exchange rate 4.603, GDP 1.5%, Brent oil price 74.5 dollars a barrel, oil production 788.000 barrels per day and current account deficit -3.5% of GDP.

Based on what was stated earlier in this note, some considerations regarding the budget for the year 2.024 are the following.

The country's high debt is reflected in the composition of the Budget since it is the main component of expenses and in turn the interest on that debt corresponds to the main participation that exceeds the payment of the principal. On the income side, debt is also an important source since current income only covers 63% of the total required income. Thus, each year new debt is added, as in the case of the year 2.024, which is contemplated one for 73.7b and what is amortized to the principal is only 37b since the majority goes to interest. However, the behavior of the GDP is awaited to see the proportion that the debt has been, they still expect a GDP of 1.5% slightly lower than this year.

Certainly, apart from the debt, the sectors that have the most Budget are education, health and defense, which in the case of the first two are redistributive to the extent that they are directed to the different territories of the country through the general participation system. In the case of defense of the 55b of the Budget, almost half goes to the remuneration of the 500.000 members that are required due to the own country defense requirements.

The teaching profession is the other large group along with the military, having 356.000 people who are paid, unlike the military, by the system of current transfers to the territories, but teachers are worth 33b higher than the military.

Both retired military personnel and teachers receive their allowance directly from the National Budget, which ad amounts to 16b for defense and 12b for teachers. Between the two, they exceed what Colpensiones pays to its pensioners with Budget resources, which is 25b. Thus, the current pension reform underway in the Congress of the Republic is limited to the resources managed by private retirement funds and Colpensiones and does not contemplate anything about other pensioners paid with the National Budget such as those mentioned before.

The Public Administration workers included in the government ministries and judicial branch together with the military and the teaching profession total 1.1 million people, a figure that even without taking into account the jobs of territorial and municipal governments with which they would total almost 3 million according to the official sources, are the reflection that the public Administration occupies third place as a source of jobs since according to official figures, first it is commerce 3.9 million and then agriculture 3.3 million. It surpasses the industry that is lagging with 2.4 million.

Also, observing that current income is only 63% of the total required income, it becomes complicated due to the lack of sources of income to lower internal and external credit resources, but with consequences for the country's growing level of indebtedness in times of low GDP or tax collection would have to be increased with modifications that have been proposed by several research centers. These are higher rates on the income tax of individuals to increase their collection, which is one of the lowest worldwide, and rather reduce those of companies, a reform that the country is in arrears of making. Likewise, the wealth tax that only collects as shown in 2b requires a restructuring towards higher wealth for a higher level of collection. The 4*1.000 tax that collects 15b is permanent due to its level of collection that is difficult to replace.

The option of reducing expenses instead of increasing tax collection would be choosing where to cut; of the Public Administration, the military and teaching profession are ruled out, but the rest could be included, which are a total of 283.000 positions to be selected for a value of 37b; and also, from local governments. A mix between the two possibilities, raising income tax for individuals and reducing Public Administration charges is also feasible.

Another option that is less viable is to cut education or health, which are the two main destinations of the Budget (70.5b and 61.5b respectively) apart from debt service as mentioned at the beginning of this note, through lower territorial transfers, although this It would harm the entire population of the country (but especially those with lower incomes, who are poor and vulnerable, 70% of the population) contrary to social equity in a country with a high monetary poverty of 37% of the population, a unemployment of 9.3% higher than the average for Latin America and a high inequality of 0.52 in the Gini coefficient. The country's economic strengths include the reduction in inflation (although it remains high) in recent months mainly that of the poor and vulnerable, as well as the decrease in the unemployment rate and monetary poverty, which was at 39%.

Therefore, raising the income tax rates for natural persons and lowering the Public Administration payroll that allow obtaining more economic resources to finance the Budget require reforms that must be processed in the Congress of the Republic or decrees, if applicable of the Public Administration and therefore are medium or long term objectives. In the short term, it is necessary to have the resources of both internal and external debt and for Colombia to maintain economic indicators acceptable to the markets and international organizations as it is doing with the fiscal rule and the inflation objective within the target range.

What the Budget contemplates for education and health for all Colombians mainly benefits the poor and vulnerable population and what goes for defense covers the entire country with one foot of force as a national requirement.