The Chilean Budget Office (Dipres) recently updated the nation’s fiscal outlook through 2030, revealing that projected public debt will exceed the 45% of GDP threshold. This benchmark, widely regarded as a 'prudent' level, has sparked public alarm regarding the country's long-term economic stability.
Writing for La Tercera, economists Patricio Rojas and Félix Berríos argue that the current focus on this specific numerical threshold is fundamentally misguided. They contend that the 45% limit was never intended to serve as a comprehensive economic objective for guiding state policy, but rather as a risk-mitigation tool.
According to Rojas and Berríos, the primary purpose of the threshold is to reduce the probability of unsustainable fiscal trajectories. Such scenarios could lead to severe consequences, including a loss of access to financing, persistent increases in debt servicing costs, and broader macroeconomic instability.
'The prudent level of debt is not a constant, as it seems to have been installed in the discussion,' the authors noted. 'On the contrary, it is a dynamic level, and depends on economic growth, the cost of financing, the cycle, volatility and the future capacity to generate income.'
The authors emphasize that fiscal sustainability should be viewed as an intertemporal constraint rather than a static figure. They argue that exceeding a threshold—even for a prolonged period—does not necessarily imply a loss of sustainability if the government maintains a credible, coherent path toward convergence. Conversely, they warn that a nation could strictly adhere to a numerical target while still operating under a fragile fiscal structure prone to insolvency.
The role of the Autonomous Fiscal Council (CFA) remains central to this debate, as the institution has been instrumental in fostering cross-party support for fiscal order. However, Rojas and Berríos caution against misinterpreting the CFA’s technical skepticism regarding current legislative proposals.
They argue that the CFA’s inherent caution, while vital for technical oversight, should not be weaponized as a blanket argument to reject policy initiatives. The authors conclude that lawmakers must distinguish between the CFA's necessary technical warnings and the broader political responsibility of evaluating legislation based on its long-term economic impact and social welfare goals.
