Chile's Consejo Fiscal Autónomo (CFA) issued a critical report on President José Antonio Kast's megarreforma, warning of persistent fiscal deficits and nine direct risks to public finances. President Paula Benavides stressed that the impact hinges on realizing projected economic growth. The government said it will review the report.
Chile's Consejo Fiscal Autónomo (CFA) presented its analysis of the government's megarreforma project to parliamentarians, which combines spending measures, tax modifications, and regulatory simplification to boost economic growth. CFA President Paula Benavides, joined by Vice President Sebastián Izquierdo and councilors Hermann González, Joaquín Vial, and Marcela Guzmán, stated that “the short- and medium-term fiscal stress context requires a prudent fiscal approach”.
The financial report shows a persistent direct fiscal deficit, peaking at 0.71% of GDP in 2030 and 0.43% in 2050. Including the growth effect, the fiscal balance would improve by 0.41% of GDP in 2030 but remain in deficit by 0.3% that year and show deficits at least until 2031. Benavides said: “The final impact of the project on the fiscal balance critically depends on the materialization of the projected economic growth” and that “sources of additional financing of relevant magnitude, not contained in the project, will be required” from 2026 to 2031.
The CFA identified nine direct fiscal risks, including the uncompensated cost of the first-category income tax cut, high cost of the employment tax credit, temporary VAT exemption on new housing, municipal common fund compensation, medical leave integrity measures, retirement incentive quotas, tobacco smuggling sanctions, RCA annulment restitution without spending cap, and temporary substitute taxes. It also noted indirect risks from uncertainty in growth impacts and revenue passthrough.
Finance Minister Jorge Quiroz responded: “We have known it recently [...] we have to analyze it carefully on its merits and we will respond in due time and form”. The CFA recommended addressing improvements and updating fiscal projections in the next Public Finances Report.
