Peru Changes Fiscal Deficit Rules to Avoid Third Year of Non-Compliance

Perú ya no quiere incumplir con “techo” del déficit fiscal y por eso cambiará las reglas. The Peruvian government, led by Economy and Finance Minister Raúl Pérez Reyes, has announced a revision to its fiscal deficit targets for 2025 and 2026.

This decision comes after Peru exceeded its own deficit limits for two consecutive years, with the 2024 deficit closing at 3.6% of GDP, well above the legal ceiling of 2.8%. Official figures confirm the 2023 deficit reached 2.7%, also surpassing the established 2.2% limit.

The new plan raises the 2025 deficit ceiling from 2.2% to 2.5% of GDP and sets a 2% target for 2026. Minister Pérez Reyes explained that maintaining the original targets would require sharp spending cuts, likely triggering a recession or slowing growth.

Instead, the government aims for more realistic goals that reflect current economic conditions and revenue performance. Tax collection has shown double-digit growth in early 2025, but officials caution that a strict 2.2% deficit cap would still force disruptive spending reductions.

Peru Adjusts Fiscal Targets Amid Revenue Pressures

The government’s move follows consultations with international analysts, who agree that the previous targets were too ambitious given Peru’s economic context.

The country’s fiscal rules, established to ensure stability, have proven difficult to meet amid falling revenues and increased spending. The main drivers behind the higher deficits include weaker tax income, lower metal prices, and ongoing public expenditure.

Peru’s public debt reached $94.3 billion at the end of 2024, accounting for 32.7% of GDP. Despite the recent deficit overruns, this debt level remains moderate by international standards.

Official projections expect the deficit to fall to 2.5% in 2025 and 1.8% in 2026, with the debt-to-GDP ratio stabilizing around 34%. The government’s strategy focuses on gradually reducing the deficit without jeopardizing economic growth or essential public services.

More: Latin America news in English, every day from The Rio Times.

This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error