Chile’s Finance Ministry ditched its goal of balancing the so-called structural budget by 2030 on Tuesday, as the administration struggles to replenish fiscal coffers amid an economic downturn.
The government is now targeting a structural deficit — which takes into account cyclical effects such as copper prices and economic fluctuations — of 1.5% of gross domestic product at the end of its term in four years, according to its fiscal policy decree.
Asked directly during a press conference if the administration was admiting that it wouldn’t achieve its target of a balanced budget, Finance Minister Jorge Quiroz replied, “obviously, that’s what the numbers say.”
The announcement is the latest blow to the reputation of President José Antonio Kast’s administration, which had come to power on pledges to stop the state from spending beyond its means. The government has already raised its forecast for the fiscal deficit this year and asked Congress for permission to sell an additional $6.2 billion in bonds, effectively lifting the debt ceiling by 36%.
“Our fiscal objective is clear: to regulate the sustainability of public finances, stabilize the debt trajectory and strengthen the state’s financial position,” Quiroz said.
The budget target takes into account measures to rationalize and reorganize public spending — “mainly efficiency gains and also general austerity,” he said. That is on top of the $2 billion the government has already announced in spending cuts.
However, Quiroz didn’t announce any new expenditure reductions during his presentation.
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The budget office estimates published in May showed gross debt reaching 43.1% of GDP in 2026, 45.4% in 2028 and 46.5% in 2030. Those levels are over the threshold of 45% that the government has qualified as prudent, and which some people say could trigger a credit-rating downgrade.
Kast’s team will use that threshold as an anchor, according to Quiroz. Gross debt could surpass that limit in some months but the goal is to stay below it every year, he added.
“Our commitment is to stabilize it and then gradually reduce it by 2029,” Quiroz said, referring to the debt load.
Chile’s Senate is currently debating Kast’s flagship economic legislation, which includes plans to lower corporate levies, implement employment subsidies and provide tax guarantees on large investment projects. The net impact of the bill’s measures on government revenue will be negative for at least five years after they take effect, even if they bolster growth as designed.
The government’s targets take into account this proposal as well as the government’s request to raise the debt ceiling for 2026, according to Quiroz.
During last year’s election campaign, Kast pledged to deliver $6 billion in public spending reductions by targeting problems including inefficient programs and the abuse of government systems .