The proposed 2025 General Budget for Guatemala, designed by the Executive Branch, seeks to stimulate economic growth through strategic investments, with a focus on infrastructure and social development. With a total allocation of Q148,526 million—representing 15.8% of GDP—this plan offers an opportunity to address some of the country’s most pressing needs. However, as the budget advances through legislative scrutiny, both its potential and its challenges are coming to light.
A key element of the budget is the significant allocation of Q29,653 million for infrastructure, marking a 45.9% increase compared to the previous year. These investments target transportation networks, rural electrification, and water sanitation, including projects like the first metro line in Guatemala City. This increase signals the government’s intent to modernize and expand critical sectors, such as public transportation.
The proposed budget represents a 13% increase from the previous year’s budget. While according to the government this represents its ambition to drive economic activity and development, it also prompts concerns about long-term fiscal sustainability, especially given that more than 50% of the budget is allocated to operational expenses, such as salaries and administrative costs. Only 20% is set aside for investment, a pattern that may limit the impact of public spending on the country’s long-term growth.
Additionally, it has been pointed out that simply increasing spending does not guarantee better outcomes. This is particularly true in sectors such as education, where despite substantial budgetary increases, the quality of outcomes remains below regional averages. Improving the efficiency of public spending remains a significant challenge, as much of the budget is pre-allocated by laws that mandate specific funding to various programs.
There are also technical concerns with the proposal. It has come to light that the Monetary Board of the National Bank of Guatemala did not issue a technical opinion on the Budget. Think tanks have identified issues such as the allocation of debt to finance operational expenses, which is prohibited by law. They have also raised concerns regarding the accuracy of revenue projections. Outdated comparative data distorts growth estimates, and even when adjusted, concerns remain about the potential underestimation of tax revenues. This could lead to revenue shortfalls, particularly if tax collection efforts do not meet the optimistic targets.»
The legislative process for the approval of the budget is now in full swing. The Finance and Currency Committee of Congress is conducting public hearings with representatives from all ministries and public entities to better understand their budgetary requests and evaluate their alignment with national priorities. These sessions are crucial for ensuring transparency and gathering input from various sectors. After completing this review process, the committee will issue an opinion, and the budget will be debated and voted on by the Plenary. The deadline for approving the 2025 budget is November 30, 2024. Should the budget not be approved by this date, the current year’s budget will remain in effect.
While the 2025 National Budget sets the stage for important investments in infrastructure and social services, it also raises questions about fiscal sustainability, efficiency, and the increasing reliance on debt. As the proposal moves through the legislative process, these concerns will need to be carefully balanced with the country’s long-term goals for economic development.
