In early March, the Autonomous Fiscal Council (CFA) issued a harsh report on the fiscal management of Gabriel Boric's government. In the document titled “Report on the Deviation from the Structural Balance Target of 2025,” it criticized the structural and effective fiscal deficits that occurred last year, which were 3. 6% of GDP and 2.

8% of GDP, respectively. The agency emphasized that “the magnitude of this deviation is historically high for a year without extraordinary events,” meaning without a crisis. It also accused the deviation from the structural balance target of being due to problems the Budget Office (Dipres) had in estimating revenues, which faced strong questioning.

In response, the latest reply from the Boric administration, through its Budget Director, Javiera Martínez, took place on March 10, via an official letter. In that document, she addressed the main concerns of the autonomous body, at times in harsh terms. 1) Correction of 2025 Spending The CFA report indicated that “(...

) given the effective level of structural revenues, a spending adjustment of around US$6. 948 billion (2. 0% of GDP; equivalent to 8.

1% of executed spending) would have been necessary to meet the current structural balance target of -1. 6% of GDP,” and …

” The Dipres responded: “Recognizing the importance of making the necessary spending adjustments to meet fiscal targets, it should be noted that the Council's recommendation does not consider the impossibility, without legislative changes or affecting the continuity of public services, which would imply realizing a reduction in spending of around US$6. 948 billion within the same year. ” In this regard, she added that “in various instances - including direct communications to the Council (or in) public presentations - the significant rigidity of a relevant part of public spending has been exposed, as well as the legal obligations that condition its execution.

Furthermore, it is incompatible with the Council's concern about public investment execution. ” In the analysis, the Dipres argued that “most of the deviation from the target occurred from October. In this context, focusing the analysis on this aspect without considering relevant background and restrictions may limit a fully informed discussion - both from a technical and public policy perspective - regarding the fiscal situation.

” 2) Trend of Gross Debt The CFA report mentioned that “(... ) while gross debt as a percentage of GDP in 2025 remained below its prudent level and similar to the previous year, the Council warns that this was not due to fiscal consolidation, but rather mainly to factors independent of fiscal policy - such as higher nominal GDP growth, due to a higher GDP deflator and the appreciation of the exchange rate - which could be of a transitory nature. ” In response, the Dipres argued that “if the exchange rate had remained in line with previously projected levels, gross debt would have reached 42.

1% of GDP, which would also have been a significant change in the trend observed in the years prior to the current administration. Additionally, the average annual growth of debt in this government was 1. 4 percentage points of GDP, while the three previous governments averaged 3.

2 pp. , 2. 7 pp.

, and 1. 7 pp. , respectively.

” 3) Other Assets In its report, the CFA stated that “during 2025, there was intensive use of Other Public Treasury Assets (OATP) as a source of financing, which decreased from US$2. 946 billion in the second quarter to US$46 million at the end of the year. ” The Dipres responded that “the comparison presented by the Council is not technically equivalent, which can lead to conclusions that do not adequately reflect the characteristics of the analyzed indicators.

” In this context, she asserted that “it would have been valuable to have the opportunity to clarify these aspects and respond to the corresponding technical doubts beforehand. ” She also stated that “it is not entirely clear the criterion used to consider the second quarter as a reference point, instead of other moments of the year, such as the beginning of the fiscal year. ” For the Dipres, a monthly snapshot does not necessarily reflect the annual situation adequately.

For example, she pointed out that the monthly closing balances of Other Public Treasury Assets averaged around US$1. 780 billion during the year. “In this sense, observations in a specific month may be influenced by transitory cash management factors, such as debt issuances, amortization payments, or other movements typical of the Treasury's financial management,” the Dipres stated.

4) Justification for Changing Targets The CFA indicated that “(... ) in its Report on the modification of the decree that sets the bases of fiscal policy for November 2025, it stated that the use of other extraordinary causes must be strictly exceptional, duly justified, and consistent with the purpose of Law No. 21,683.

Furthermore, the Council considered that corrections to revenue projections, by themselves, do not constitute a sufficient basis for modifying fiscal targets under this figure. ” In this regard, the Dipres replied that “we want to emphasize that the founded justification was not solely the correction of revenue projections. What was stated is a simplification that is not closely aligned with what is established in the current Fiscal Policy Decree and in the corrective action document established by law published alongside the Public Finance Report of the first quarter of 2025.