Chile government orders spending cuts amid fiscal squeeze

By Daina Beth Solomon

March 17 (Reuters) - ‌Chile's government has ​ordered ​a blanket spending cut of nearly $4 billion as part of a plan to improve public finances and safeguard social benefits over the medium ‌term, according to a document seen by Reuters on Tuesday.

In a ⁠March 13 memo to the public sector, the budget office said the first part of the plan ‌includes a $3 billion reduction in ‌the 2026 spending ceiling, in addition to another cut announced by the previous administration to reduce gross spending by $800 million.

"The government will implement a Fiscal Adjustment ​Plan, with the first phase to be carried out in March 2026. Only in this way can it restore the sustainability of the public finances, safeguard ⁠social benefits over the medium term and free up resources to respond to emergencies," the document said.

It said the ​main areas of focus are combating abuses and bad practices, improving spending efficiency and enforcing fiscal austerity, in line with President ​Jose Antonio Kast's pledge to conduct audits across ‌government after taking office last week.

The $3 billion will come from an across-the-board 3% cut in the gross spending of each budget item, ⁠to be applied uniformly across each expenditure subtitle and implemented in March through a finance ministry decree to be sent to the comptroller's office.

It will also come from an additional $1 ⁠billion to be targeted by each ministry individually, based on efforts to identify abuses and bad ​practices in the use of fiscal resources, as well as areas for permanent efficiency gains and austerity.

Among other measures, it recommends reviewing service contracts, analyzing "abuse" of sick leave and absenteeism as well ‌as tenders that had not been carried out as of March.

"The adjustments made in 2026 will form part of the ‌baseline for drafting the 2027 budget, given the permanent nature of the adjustment, and their ⁠effect will be extended to subsequent ‌years," the document said.

It added ​the adjustment decrees are expected to be issued no later than Friday.

(Reporting by Daina Beth Solomon; Writing by Fabian Cambero; Editing by ‌Chris Reese)

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