Chilean Government Spending Surges 11.8% in Early 2025
The Chilean Budget Office (Dipres) released its first public sector budget execution report for 2025, revealing a significant 11.8% increase in Central Government spending.
This surge comes amid debates over deteriorating public finances, prompting the Finance Ministry to implement a preventive spending cut of over $600 million.
The total government expenditure showed high dynamism at the start of the period, driven by increases in both current and capital spending. Current spending, aimed at state operations, grew by 7.4% annually.
This rise was primarily due to the Readjustment Law (No. 21.724), which led to a 15.7% increase in personnel expenses. Capital spending, encompassing public investment and resource transfers, saw a dramatic 97.1% real annual growth.
This surge was largely attributed to a 702.9% real increase in investment initiatives, mainly from the Ministry of Public Works. The acceleration was due to faster identification of public investment initiatives and increased execution of non-financial asset acquisitions.
Chile’s Public Finances
On the revenue side, total Central Government income grew by 9.6% annually, driven by a 16.4% increase in tax revenues. Income tax revenues rose by 48% in real annual terms, partly due to the final month of collection for the substitute tax on final taxes (ISIF).
Value Added Tax (VAT) increased by 11.4%, in line with growth observed in December 2024. However, property income revenues contracted by 52.2% in real annual terms.
This was mainly due to a 65.1% decrease in collections from the Chilean Economic Development Agency (Corfo) associated with lithium contracts. Despite these fluctuations, the public sector recorded a surplus of 0.1% of Gross Domestic Product (GDP) for the month.
Looking at a 12-month perspective, total revenues stand at around 22.1% of GDP, with expenses at 25% of GDP, resulting in an effective fiscal deficit of 2.9% of GDP.
This spending surge highlights the ongoing challenges in managing Chile’s public finances, balancing economic growth with fiscal responsibility in a complex global economic landscape.
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This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error · Editorial responsibility: Matthias Camenzind, Editor-in-Chief