Legal Limit to Government Net Indebtedness
The 2020-2024 National Budget Law No. 19,924, promulgated on December 18, 2020, includes a new authorization framework for Central Government indebtedness. Article 696 of this law sets a cap on Government Net Indebtedness (GNI). GNI is defined as gross indebtedness (bond market issuance and disbursed loans) net of debt amortizations and the variation of Central Government’s liquid and other financial assets, during the fiscal year.
The borrowing framework also includes a safeguard clause that allows for an increase in the legal cap, which is only applicable under extraordinary circumstances (unexpected events such as natural disasters, pandemics, strong changes in relative prices, or an economic recession). When invoked, the clause allows for up to an additional 30% increase in the baseline net indebtedness amount authorized by Congress.
For 2020, the GNI legal limit was set at USD 3,500 million (Law No. 19,924). The actual GNI figure for that year was USD 3,113 million (for more details, see page 84 of Rendición de Cuentas 2020, in Spanish).
For 2021, the Central Government’s net indebtedness limit was originally set at USD 2,300 million. In July 2021, the government communicated to Congress the need to activate the safeguard clause, in light of the additional budgetary resources required to address the health, social and economic fallout from Covid-19. Hence, the augmented legal limit for net indebtedness in 2021 was USD 2,990 million (for more details, see the transcript of the Ministry of Economy and Finance´s presentation in Congress, in Spanish). The actual observed figure for GNI during 2022 was USD 2,563 million (for more details, see page 144 of Rendición de Cuentas 2021, in Spanish).
For 2022, the GNI legal limit was set at USD 2,100 million (Law No. 19,996, article 343) and the observed GNI figure was USD 1,860 (for more details, see page 192 of Rendición de Cuentas 2022, in Spanish).
For 2023, the GNI legal limit was set at USD 2,200 million (Law No. 20,075, article 500). In June 2023, the government communicated to Congress the need to activate the safeguard clause, in light of the additional budgetary resources required to address the current water deficit emergency, increasing the legal limit to USD 2,860 million.