International markets trust Peru's fiscal strength, and it is feasible that the country will achieve its 2.2% of GDP fiscal deficit target by the end of 2025,
The expert stated this while presenting the document "Peru Public Finance Review" (PFR), together with World Bank Senior Economist Natasha Rovo, a report released in the country for the first time in 10 years.
Cusato indicated that Peru has maintained fiscal stability in recent years; however, fiscal risks have increased to some extent.
However, he highlighted that, from the public debt perspective, "the increase in gross public debt has been lower than that of regional peers," and when comparing with countries of a similar development level, Peru's public debt is "relatively low."
The expert noted that this outcome is the result of using the State's savings, as the public sector's financial assets have been declining since 2015.
Likewise, he emphasized that the State has shown a "very prudent behavior" in fiscal matters, because it spends in difficult times and tries to save during prosperity periods.
Cusato stated that the World Bank has a position on the country's fiscal strength level, as do local analysts and economists, but financial markets assess and rate Peru's country risk on a daily basis.
"So, when one looks at the objective data, we see that markets still trust the country's fiscal strength," he underlined.
Compliance with the fiscal rule
On another note, the World Bank economist stated that the fiscal deficit has fallen from 3.5% to 2.3% as of October this year, and we are just 0.1 percentage points away from reaching the 2.2% of GDP target.
"November and December are still ahead. I believe it is feasible. In the last month, adjustments can be made in any (budget) item, and the target can still be reached," he indicated.
Regarding compliance in 2026, it will depend on the new authorities' willingness to continue ensuring adherence to the fiscal rule that year.
Budget modifications
On another note, the World Bank economist warned about the number of budget modifications for public investment projects, noting that 650,000 minor budget changes were made in 2023.
"When the State's revenues increase, it allocates more resources to public investment projects or through budget modifications. At the same time, when the State's resources decline consecutively, as has happened —let's say— since 2021, the State also adjusts through these budget modifications," he explained.
Furthermore, Cusato noted that Peru has room to mobilize resources for public investment.
"Peru still has room to mobilize a greater amount of resources. If we look at average total revenues —let's say— compared with the region or countries with similar levels of development, there is still significant potential to increase tax collection," he explained.
In this regard, the economist indicated that there is room to improve personal income tax collection, as it is low compared with other countries in the region.
The expert stated that the document "Peru Public Finance Review" outlines fiscal risks and emphasized the need to limit Congress' discretion regarding spending initiatives.
"In the case of budget modifications, we are analyzing in the report; we should include —let's say— budget reallocations and incorporate some type of criteria or principles for service continuity," he indicated.
Cusato also considered it important to strengthen the Fiscal Council and redesign fiscal rules, essentially introducing corrective mechanisms linked to future spending.
On another note, he pointed out that the country is registering an increase in public investment projects, but it is necessary to enhance execution capacity.