Finance Ministry explains higher deficit in proposed 2027 budget

Guatemala’s proposed 2027 budget would push the fiscal deficit to 4.4%, up from 2.7%, as the government plans to spend Q192.045 billion. The proposal has already drawn criticism from lawmakers, who are questioning an increase of more than Q23 billion.

Vice Finance Minister Walter Figueroa said more than Q17 billion of the additional spending would support the National Infrastructure Agency, the expansion of Puerto Quetzal, a fund for priority road projects and other transport initiatives. The proposal also includes Q1.2 billion for departmental development councils, which could help local governments offset lost revenue linked to reforms to the Single Property Tax Law.

“If we add up all those elements, there will be around Q17 billion, which is fundamentally what makes the fiscal deficit increase,” Figueroa said. He added that international organizations have repeatedly pointed out that Guatemala has one of the lowest tax burdens in the world.

Figueroa also urged reflection on the erosion of tax collection caused by the elimination or suspension of some revenues. That decline, he said, affects projects needed to modernize the country, leaving debt as the source of financing.

Responding to concerns about the government’s ability to repay, Figueroa said borrowing limits depend on fiscal sustainability assessments conducted by the Finance Ministry. Guatemala still has fiscal space, he said, and the debt contemplated in the proposal, including the deficit, may remain below 27% of gross domestic product. The ministry’s budget officials are also presenting transport-related funds included in the proposal.

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If we add up all those elements, there will be around Q17 billion, which is fundamentally what makes the fiscal deficit increase. But we must take into consideration what many international organizations say, that Guatemala is a country with one of the lowest tax burdens in the world.