Guatemala’s internal debt balance will increase by 19.7% and will reach Q151 billion

Guatemala reached an annual debt balance of Q231 thousand 324.08 million in 2024, which meant an increase of Q8 thousand 748 million with respect to 2023, which was Q222 thousand 575.73 million, according to the public credit operations report that records this type of operations as of last December 31.

Although the indicators show that there was an “adequate” management of public debt, the concern is concentrated in 2025, especially for the approval of greater indebtedness required by the Ministry of Finance (MINFIN) for Q25 thousand 104 million and approved the Congress of the Republic in November 2024, with the Law of the Income and Expenditure Budget.

With the closing information available, the new borrowing balance for this fiscal year, that is, for a second year of the administration of the Bernardo Arévalo, the indicator would be placed in the Q255 thousand 46.79 million, which is equivalent to an increase of 10.3% with respect to 2024, according to the scenario.

The balance of the internal debt would be 16.2% and the balance of the external debt by 11%, with an estimate of the Gross Domestic Product (GDP) of Q937 thousand 78.40 million with which the budget was formulated.

As a reference, the per capita debt or by inhabitant would be of Q14 thousand 106.

THE BALANCE AND STAGEARY 2025

By 2024, the balance of the internal debt was located at Q126 thousand 994 million and the external – prison and credits – in Q104 thousand 329 million.

With what was approved by Congress this year at the request of the Executive, the balance of the internal debt would remain in Q151 thousand 994.41 million, which would mean an increase of 19.7% or that is double digit. While the external debt would reach Q103 thousand 52.38 million which would mean a contraction of -1.2%.

The increase in internal debt would be explained by the approval of Q25 billion in the expense program, and that the minfin authorities justified that it was destined for infrastructure.

While the external debt is raised Q2 thousand 406.20 million, but in the balance an amortization of Q3 thousand 683.50 million is recorded, so the balance is negative in -q1 thousand 277.30 million.

The State captures the means of financing that imply indebtedness, to allocate them to the operation of the public apparatus.

An analysis of the Central American Institute for Fiscal Studies (ICEFI) was already alerted to bulky increase in the public debt bonus by 2025 in the hiring of Q25 thousand 104 million.

According to the ICEFI for the hiring of the new debt Q12 thousand 12.6 million or 47.9% would be allocated for operation, which include activities such as administration with Q3 thousand 293 million; Materials, supplies and non -personal services Q3 thousand 525 million and current transfers for Q5 thousand 193 million.

For investment Q7 thousand 336 million equivalent to 29.2% and is destined for physical investment Q6 thousand 141 million; Capital transfers Q346 million and financial investment Q848 million.

Finally, for the service of the public debt Q5 thousand 754 million that represents 22.9% and the items are amortizations Q1 thousand 49 million and for interests, commissions and other expenses Q4 thousand 705 million.

VERSUS GDP DEBT

One of the variables is that the indebtedness of external loans and versus GDP bonds in 2024 was 26.4% being less than 27.2% of 2023; to 29% of 2022; 30.6% of 2021 and 31.5% of 2020, which were influenced by the health emergency.

That is, public debt had to be resorted to the crisis at that time and that the indicator should return to its normal tendency. Only in 2025, the hiring of new debt was increased again.

What is reading?

For the economist Maynor Cabrera, of the Economy for Development Foundation (Fedes), he declared that in general, the report shows that public debt grew in absolute terms last year in Q8 thousand 748 million higher than Q7 thousand 820 of 2023, although at lower speed; that is 3.6% 2024 versus 3.9% the previous year.

He explained that the balance as a proportion of GDP fell to 26.4% of GDP and grew more external debt than internal.

On the other hand, he considered that the debt service increased because the average interest rate is higher for all types of debt, especially for the external, which, although on average its rates are lower, was the one that increased the most. “In fact, the average of the Eurobones rate is the highest since 2015,” he said. And this would be explained, among other factors, due to higher interest rates internationally.

In his opinion there is a slight improvement in the total balance indicator regarding GDP, while indebtedness to total income – which better reflects the risk of Guatemala, due to its low fiscal income – remained constant.

What does it mean?

The increase registered in the minfin report should not be seen only by the side of the amount in Quetzales, but must be considered the size of the economy and the ability to serve the debt. However, according to analyst it is also important to see trends and context.

On the one hand, international rates are higher than five years ago and it is not yet clear at what speed they will fall. And, on the other hand, it is important that tax revenues continue to grow and that the economy maintains its dynamics and hopefully improve its growth rates.

This together with increases in debt quotas, may or may not affect the economy. He quotes as an example, that the amount in Quetzales does not tell us so much if we do not contrast it with the evolution of the economy or tax revenue.

He recalled that, if the Q231 billion of 2024 when comparing with GDP shows a slight improvement, but that, contrasting with tax revenues, it means that we end up the same as in 2023.

The risks for 2025

On the map, there are different risks for this year. Cabrera remarked that the main thing is that the debt increases faster. And, in fact, with the approval of the budget implies a higher speed in indebtedness.

In addition, he reiterated that interest payment is higher than in previous years and it is not clear if it will decrease.

“The result of the first year of government denotes that the execution of the budget was below the projected and even below the income received. It is foreseeable that the public administration will increase its ability to execute funds and that the pressures to meet objectives press the upward spending, ”he said.

He insisted that the multiannual budget states that indebtedness will be 29.6% of GDP during the last year of Arévalo’s mandate; Without increasing government financial capacity in terms of a better tax collection and greater government efficiency, it could raise risks towards future.

Interest payment

Fredy Gómez, director of the cardinal consulting firm and former Minfin official, agrees that there will be an acceleration in the amount of placement in which it has two effects: the positive is that there will be financing for the different projects and the negative, the ideal is that the indebtedness gives you an internal importance to develop the capital market especially for the small investor.

In recent years, external placement has been prioritized, which is easier to place the bonds to obtain resources more immediate.

He also warns that due to the placement of the amount of Q25 billion, around Q1 billion should begin to be liquidated in 2026 only for interest, which is a strong amount.

“In a country in need as Guatemala to pay Q1 billion interest, and it is a topic that is worth studying and no greater collection is being used,” he said.

There is currently a formalization for what is moving the entry of family remittances to the economy, and must be strong to increase tax revenues.

He concluded that the numbers are still acceptable for the strength of the debt, however, the debt service is already too high that must be managed.