Chile revises fiscal balance target down amid major tax reform debate

Chilean Finance Minister Jorge Quiroz has acknowledged that the government will not achieve its campaign promise of fiscal balance by 2030. The revised target for structural fiscal balance is now projected at -1.5% of GDP, a downward adjustment from the initial goal. This recalibration comes as the Senate is actively debating a significant tax reform package championed by President José Antonio Kast.

The Ministry of Finance has published a decree outlining fiscal policy for the next four years. It indicates that the current fiscal deficit, standing at -2.6% in 2026, will gradually decrease but not reach full balance by the end of the presidential term. Projections show the deficit falling to -1.8% in 2027, -1.7% in 2028, and -1.6% in 2029. This adjustment is occurring while the "megareform," a controversial package including tax cuts for large corporations and tax stability guarantees, faces an uncertain approval in the Senate due to a lack of a clear majority.

Minister Quiroz stated that meeting these revised projections hinges significantly on recovering economic growth. He expressed confidence in the government's ability to achieve this, outlining a four-pillar economic plan: growth recovery, rationalization of public spending, modernization of state asset management in public companies, and comprehensive fiscal asset and liability management. Quiroz assured that spending cuts would not impact social benefits. The government's fiscal roadmap also includes maintaining public debt at 45% of GDP. International bodies like the IMF had previously raised concerns about the feasibility of Chile's original fiscal balance goals.